company -- the words are those of the late Albert Einstein.
Business Tax Returns
The filing of corporate tax return has become increasingly complex and time consuming. This is why the assistance of a qualified accounting firm has become a necessity for a growing number of businesses wanting to ensure that taxes are prepared accurately and error-free.
If you haven't incorporated your business or is operating as a Single Member LLC, or have been consulting and received a 1099-MISC reporting the income, then most likely you are a Sole Propreitor.
As such you will be filing your business tax return as part of your personal tax return.
Its very important for you, the Sole Propreitor to consult one of our experienced accountants immediately so that we can help you with tax planning and minimize your tax impact at the end of the year.
One the main thing to watch out if you're a sole propreitor or have received a 1099-MISC is the is the self-employment tax. As a self-employed business owner, you will have to pay 15.3% of your net income towards self-employment tax which is essentially social security and medicare. This is in addition to any income tax that you might have to pay.
At Tax & Financial Services, we will work out an estimated tax plan that you can follow through out the year, and minimize your tax impact at the end of the year.
Self employment taxes are only at the Federal level so for California the only thing to be wary of is the income tax. We will also go over any tax credits that might be available based on the type of business you have and your business activities through out the year.
Corporate Tax Returns
Whether your company is structured as an C-Corporation, SCorporation, Limited Liability Company (LLC) or a Limited Liability Partnership (LLP) we can assist you.
For Federal income tax purposes, a C Corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.
The profits of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to its shareholders. Shareholders cannot deduct any loss of the corporation.
The tax return due date for a C-Corporation is the 15th day of the 3rd month after the close of its taxable year.
A C-Corporation registered and operating in California is taxed at a rate of 8.84 percent and are also subject to a minimum tax of $800 by the Franchise Tax Board.
The minimum franchise tax ($800) is due the first quarter of each accounting period and must be paid whether the corporation is active, inactive, operates at a loss, or files a return for a short period of less than 12 months. The minimum tax is waived on newly formed or qualified corporations filing an initial return for their first taxable year. However, any first-year net income is still subject to the 8.84 percent tax rate
The estimated tax is payable in four installments. Shareholders may have to make estimated tax payments for their own reporting purposes.
S corporations are corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income.
S corporations must provide each shareholder with a Schedule K-1 that states the shareholder's pro rata share of the S Corporation's items of income, deductions, and credits.
S Corporations that organize in California, register in California, conduct business in California, or receive California source income, must file California S Corporation tax return.
An S Corporation in California is taxed on its net income at a rate of 1.5 percent for California purposes but are not usually subject to income tax for federal income tax purposes. The S Corporation is also subject to the same minimum tax of $800 as a C-Corporation.
Limited Liability Company (LLC)
Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC's owner's tax return (a "disregarded entity"). Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it elects to be treated as a corporation. And an LLC with only one member is treated as a Sole Propreitor unless it elects to be treated as a corporation.
An LLC formed and operating in California is subject to a minimum of $800 franchise tax and then based on its election could be subject to other taxes as well.