A corporation is one of the most common types of business entities. It is a business started by a group that applies for a charter from the secretary of state where the business is located. Once a corporation is founded, it can be a permanent fixture. There are different types of corporations, ranging from a C corporation to a real estate investment trust.
Two common types of corporations are the C-Corporation and the S-Corporation (both require tax ID). With both, the policy issues of this business undertaking is decided by the votes of the shareholders, but the decisions are taken by the elected body of the company’s board of directors. The key difference involves how taxes are paid. With a C-Corporation, the shareholders shoulder the taxes earned on company profits. With an S-Corporation, there tends to be a level of double taxation that is discussed on the S-Corporation page along with its tax ID requirements.
It’s important to know how corporations handle tax before you apply for your tax ID. The C-Corporation is liable to individual taxes, and shareholders are taxed using graduated tax rates. This table will give a fair idea of the tax brackets:
$ 0 – $50,000 = 15%
$50,001- $75,000 = 25%
$75,000-$100,000 = 34%
$100,001- $335,000 = 39%
$335,001-$10,000,000 = 34%
$10,000,001-$15,000,000 = 35%
$15,000,001-$18,333,333 = 38%
OVER $ 18,333,333 = 35%
The losses of the C Corporation are not passed on to the shareholders. Instead, they offset the taxable income.
Some companies do not qualify for a C-Corp and must instead form a Qualified Personal Service Corporation. There are special benefits for Qualified Personal Service Corps and this needs the filing of PSC form for tax benefits. The fields that are covered under this are architecture, accounting, health, law, science, and performing arts.
These business entities are almost individuals on their own and therefore can own, rent, sue, and also be sued. They also have their own tax ID. If your business is attracting outside investment, then protection of investors is must, and it also calls for a heightened legal need.
The strength and the sanctity of the corporation must be maintained and this can be done through proper maintenance of funds, avoiding fraud, meticulous financial records, and maintaining capital.
A corporation is what the entire American economy thrives on. The strength of this particular entity is due to its liability protection and its other various benefits.
Every corporation is required to have a tax ID to operate. The tax ID helps you open bank accounts, hire employees, etc. Start your corporation easily by filling out our simplified Corporation EIN tax id form. It takes just a few minutes and you’ll be on your way. With IRS-EIN-TAX-ID, your tax ID process will be as smooth as possible.