Chapter 5 Flashcards
An S-Corp is
a small business corporation
C-Corps are
corporations that are chartered with the state and are legal entities
A Corporation is
a separate entity from its shareholders
When you own stock
You are an owner of the c-corporation
Because C-Corporations are
separate legal entities they are taxed as a separate thing; they have their own tax rate, their own forms, they file an 1120s form and they file their own tax
If a c-corporation wants to give their shareholders money, they issue a
dividend
The dividend given by C-corporations to shareholders is
Taxable at the shareholder level
What is double-taxation?
When a C-corp is taxed and then a dividend is taxed for the shareholder
The tax rate on a dividend is
21%; 21% is given to the IRS and then the remainder is taxed 21% at the shareholder level
When the second George Bush was president, the tax rate was changed from a
35% corporate rate and a 20% dividend rate
The logic behind the change in tax rate is
You’re being taxed twice; You’ve already been taxed 35% at the corporate level, so why should you have to pay that tax again at the individual level? That’s why the dividend tax rate was reduced to 20%
Donald Trump reduced the corporate tax rate to
21%
The C-corp is not
a pass-through entity because the gains and losses do not pass through to the shareholder; the only time a shareholder is taxed is when the corporation pays a dividend
Partnership pass-through entities generally don’t
pay tax, the partners pay the tax
The max rate is 37%, partners pay
37% on their income regardless of whether or not they are given a distribution (dividend)
