1 of 4

Write now Article Tools

Page 3 of 3

Splitting

Like in the example above, many C corporations use income splitting to lower the tax burden by giving out year end bonuses and dividend payment to shareholders. With effective yearlong planning this lowers the corporation's and shareholder's marginal tax rate. In, general the less money left in the company at the end of the year the less taxes the corporation will have to pay on that money. Essentially, you have to give it to someone but you don't necessarily want it to go to Uncle Sam.

Tax-Free Benefits

C corporation owners have some of the greatest freedom in the benefits they can write off at the end of the year. Generally speaking sole proprietors, partnerships and LLCs can take fringe benefits, but there are more criteria and not everyone will qualify. Owners of C corporations can write off all of the benefits for their employees and themselves. These include deferred compensation plans, term life, health insurance, disability, and medical expenses. But, all reasonably eligible employees must be offered the coverage or your personal write-offs will be disqualified. Therefore, these write-offs work best for large corporations looking to minimize their tax liability.

Resources

There are many helpful resources written about C Corporations and the tax aspects of running one. Believe it or not even the IRS has some helpful publications. But, the most important resources to companies looking to incorporate will always be the help of tax experts and lawyers. It is crucial that you ensure company is conforming to local laws and has a sound tax strategy.

Learn more about this author, Erica Fields.
Click here to send this author comments or questions.

• << previous page
• 1
• 2
• 3

Add your voice

Know something about Tax aspects of C corporations?
We want to hear your view. Write now!