| y"> | | | | Corporation is a stand alone tax entity, what happens |
| If you are going to form a corporation, you might be | | | | when you purchase stock? |
| surprised to learn a "C" corporation comes with a lot | | | | You have made arrangements to form a "C" |
| of tax benefits. While this article isn't intended to | | | | corporation. Now you have to buy stock in it to |
| replace the advice of a good tax professional, it may | | | | become a shareholder. If you exchange money or |
| serve to open your eyes to the value of a "C" | | | | property for the shares, the IRS takes the position no |
| corporation. | | | | taxable event occurred. In essence, this means the |
| "C" Corporation | | | | corporation will not have to report you contribution as |
| The "C" in C corporation has a few legal ramifications, | | | | part of its revenues. If the money isn't considered a |
| but it is primary a designation for tax purposes. Put in | | | | part of the corporate revenues, no tax must be paid |
| layman's terms, the designation simply means the | | | | on it. |
| corporation will act as its own tax entity. In contrast, an | | | | The exact rules for funding a corporation are a bit |
| "S" corporation acts as a pass through tax entity, | | | | more complex. With any tax issue, you can expect |
| pushing its financials down to the shareholder who | | | | there to be roughly fifty exceptions and qualifiers. For |
| report the information on their personal tax returns. | | | | instance, if you were to exchange services instead of |
| The Internet Revenue Code sets out the law on tax | | | | money for the stock, the above example would not |
| and it contains a few juicy provisions for corporations. | | | | apply. Make sure you speak with a tax professional to |
| Lets take a look at one of the advantages. | | | | handle your particular situation correctly. |
| Incorporating | | | | In Closing |
| When a party transfers something of value to another | | | | Many people choose a business entity without |
| party, the IRS gets interested. It views the receipt of | | | | considering all relevant aspects. Taxes definitely |
| something of value as a taxable event. In simply terms, | | | | constitute one of these aspects. Make sure you look |
| if you pay me for forming a corporation, I have to | | | | into them prior to making your decision. |
| report and pay taxes on the money. Since a C | | | | |