Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I'm curious about how C corps get taxed. I'm considering…

Hi I'm curious about how...
Hi I'm curious about how C corps get taxed. I'm considering switching my company from a sole proprietor to a C corp.
Show More
Show Less
Ask Your Own Tax Question
Customer reply replied 4 months ago
I'm a Tile sub contractor. I draw a decent salary for myself and I end up with a large sum of money that gets taxed every year.
Customer reply replied 4 months ago
I'm trying to see if switching to a C corp would allow me to save the money in the business for later investments in the business
Answered in 19 minutes by:
10/18/2017
Fred Rook
Fred Rook, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 96
Experience: 20+ years as a Certified Public Accountant, including 19 years working in public accounting firms with extensive tax, audit, write-up and consulting experience.
Verified

Hello, my name is ***** ***** I can help you. First, I would say that some form of a corporate entity over a sole-proprietorship would be prudent so that you can protect your personal assets if you get sued. C-Corps are taxed on their profit at the corporate level, however there is a double tax here because the corporation revenue is taxed, and then again when that income passes through to C Corporation members (ex - shareholders). I would consider an LLC instead. For starters, you wouldn't have to file a separate business return (a C-Corp would require a corporate return). If you will be the sole member of the LLC, the entity would be considered a "disregarded entity" for tax purposes, and you can report the activity directly on your personal return (on your Schedule C).

Regarding your second comment, if you want I can jump on the phone with you to possibly jump-start your tax planning. This is certainly the right time to do it (rather than December)!

Let me know if this answers your question, or if you have any follow up questions.

Ask Your Own Tax Question
Customer reply replied 4 months ago
I understand the double tax issue. What is normally the corporate revenue tax rate?
Customer reply replied 4 months ago
I'm trying to see if I keep the money in the business and somehow get taxed less than I would in a sole proprietor or LLC.
Customer reply replied 4 months ago
Eventually I would like to save enough to purchase a commercial building for my business

The corporate tax rate varies from 15% to 35% depending on the amount of corporate income. I have attached a schedule that will give you an idea.

Ask Your Own Tax Question
Customer reply replied 4 months ago
These are quite high.
Customer reply replied 4 months ago
I get taxed at this as a C corp rate on net income not revenue correct?

Correct. You get taxed at the corporate tax rate (based on your corporate net income). Then shareholders pay tax on dividends or profits distributed at roughly 20%. A pass-through entity like an S-Corp or an LLC distributes the profit to the members, who then pay tax one time at their effective tax rate.

Ask Your Own Tax Question
Customer reply replied 4 months ago
Got it. So that seems like the least costly solution.
Customer reply replied 4 months ago
Are S corps LLC and regular LLC the same from a taxation stand point?

They are both "flow-through entities" for tax purposes, meaning that the profits flow to you without a level of corporate tax. However there are differences. If you form an LLC, and you are the only owner, you would only have to report the corporate activity on your schedule C. An S-corp requires a separate tax filing (form 1120S) and generally have more legal and and administrative restrictions that might or might not apply to you (ex - 100 shareholder limit, cannot be owned by business entities, etc).

Ask Your Own Tax Question
Customer reply replied 4 months ago
I see. So an LLC can be owned by another LLC.l while an s-corp LLC cannot.

Correct.

Ask Your Own Tax Question

Just a quick note, once you have more than 1 member of an LLC, you then are required to file a separate tax form (1065).

Ask Your Own Tax Question
Customer reply replied 4 months ago
Going back to taxation issues. It seems like having an LLC does not provide a tax benefit compared to a sole proprietor.

Well, the biggest advantage an LLC has over a sole proprietor is that the owners are not personally responsible for company debts. If the assets of the sole proprietorship cannot satisfy the debt, creditors can go after the owner's personal assets. That alone is worth the setup of an LLC.

Ask Your Own Tax Question
Customer reply replied 4 months ago
I agree on that aspect. I was curious if there was a better tax strategy for my business. I understand I need to change into a new form (LLC, S corp, C Corp) for the protections they provide but wanted to know what is optimal for tax benefits.
Customer reply replied 4 months ago
It seems like LLC is he way to go as you suggested and to reduce tax burden to spend as much on tax deductible expenses.

I would say the LLC is your best bet. It's essentially the same taxation as a sole proprietorship, but it provides you protection personally.

Fred Rook
Fred Rook, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 96
Experience: 20+ years as a Certified Public Accountant, including 19 years working in public accounting firms with extensive tax, audit, write-up and consulting experience.
Verified
Fred Rook and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 4 months ago
Perfect and thank you for your advice

My pleasure. If you have any additional questions please let me know.

Ask Your Own Tax Question
Ask Fred Rook Your Own Question
Fred Rook
Fred Rook
Fred Rook, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 96
96 Satisfied Customers
Experience: 20+ years as a Certified Public Accountant, including 19 years working in public accounting firms with extensive tax, audit, write-up and consulting experience.

Fred Rook is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,312 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,362 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

14,120 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,652 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Are funeral expenses deductible on IRS personal return? My
Are funeral expenses deductible on IRS personal return? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Taxpayer amended 2015 tax return to report schedule C
Taxpayer amended 2015 tax return to report schedule C income. Note schedule C was never file on original return. Can taxpayer claim Sec 179 deduction on the amended return for 2015… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,336 satisfied customers
I have an LLC last year file taxes under schedule C. My
I have an LLC last year file taxes under schedule C. My question is this year 2018 I want to file taxes for the year of 2017 as an S-corp. Can I do that? I didn't pay myself a salary last year at all,… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I'm confused when income should be on a schedule C and/or
I'm confused when income should be on a schedule C and/or reported on Schedule SE. I'm a musician that gets 1099 for gigs and teaching in addition to W-2s. I was told that expenses used on Schedule C … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,336 satisfied customers
I'm a sole proprietor in - wanted to plan for taxes and know
I'm a sole proprietor in KY- wanted to plan for taxes and know where to send taxes in.1. Which am I taxed on- gross or net profit?2. How much tax do I pay if my net profit is $1150 per month? How much… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
A CPA prepared a filed a personal return last april. There
A CPA prepared a filed a personal return last april. There was a NYS and NYC refund due. The check never was received. The CPA is not helping procure a replacement check, whom should the person call o… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
20% tax deduction for pass through entities is limited for
Hi there. 20% tax deduction for pass through entities is limited for service providers like doctors. My question is: An S-Corporation provide medical billing services like sending claim, collecting mo… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,336 satisfied customers
Changing being taxed as an LLC sole proprietor to an LLC
changing being taxed as an LLC sole proprietor to an LLC taxed as an S-corp, do they need to file Form 8832 or Form 2553 or both?If both, in what order?THANKS… read more
abci168
abci168
Principal
27 satisfied customers
Under the new Tax Cuts and Jobs Act, does a Schedule C sole
Under the new Tax Cuts and Jobs Act, does a Schedule C sole proprietor qualify for the 20% deduction of qualified business income or is this only available to S Corp shareholders & LLC's?… read more
Patrick Mullis
Patrick Mullis
Masters
18 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis) - I would like to pay my son to help me with the business. The LLC has no employees by design so my son (under 18) would be an ou… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,336 satisfied customers
With the new tax laws, if I'm a sole proprietor, would it
With the new tax laws, if I'm a sole proprietor, would it make sense for me to become an LLC? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Will the new tax rates for businesses apply to sole
Will the new tax rates for businesses apply to sole proprietor medical practices? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis). I need to know if I can deduct the finance expense tied to a line of credit for my LLC from income. I generally understand that … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
Under the new tax plan, can a Schedule C proprietor still
Under the new tax plan, can a Schedule C proprietor still deduct her health insurance premiums on page 1 of Form 1040 & are there any medical expenses she can still deduct on Schedule A (if they excee… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,336 satisfied customers
If you are a sole proprietor llc and contributing to a SEP
If you are a sole proprietor llc and contributing to a SEP should it be contributed from a personal account or business account? I would think personal since on your tax return it is deducted on the 1… read more
abci168
abci168
Principal
27 satisfied customers
Is income from an LLC passed through to personal tax return
Is income from an LLC passed through to personal tax return considered earned income, enabling me to contribute to a traditional IRA?… read more
abci168
abci168
Principal
27 satisfied customers
I haven't filed a personal return since 2011 tax year. In
Hello. I haven't filed a personal return since 2011 tax year. In 2013, I moved overseas, and didn't return till 2016. Can I just file my back taxes, or must I consult with tax attorney first for any i… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x