Inevitably, all businesses must pay taxes. Corporations are subject to special taxation laws, both federally and within the state of Minnesota. Understanding these laws, and paying the correct amount of taxes could be extremely complicated and errors may result in severe consequences. A Bloomington corporate tax lawyer could help you resolve tax issues quickly and efficiently. Focus on what you and your business does best and let a Minnesota tax law attorney pilot you through the complexities of tax law. Whether you need help filing corporate taxes, evaluating the tax consequences of an action, or need help corresponding with the IRS, a Bloomington corporate tax lawyer may be of assistance.
How is Tax Different for Corporate Entities?
Corporations come in two types: C corporations and S corporations. C corporations are the most common as S corporations must qualify for the status by meeting various restrictions found within tax law.
Unlike individuals who are subject to a tier taxation schedule based on their income, the federal government imposes a tax on the profits of US C corporations at a rate of 21%. Meaning, after allowable deductions, a C corporation has profits taxed equal to the C corporation’s receipts. Allowable deductions are things including the cost of goods sold, employee compensations (including wages and healthcare), interest, state and local taxes, depreciation of assets, and advertising.
Also, unlike individual taxes, c corporations are subject to the second layer of taxation at the shareholder level. Both dividends when received and capital gains from the sale of shares trigger taxable liability. The tax rate on both is 23.8% respectively.
S corporations differ in that they do not pay corporate income taxes. Rather, income and expenses are divided among shareholders who then report income and expenses on their own tax returns.
Other Tax Issues Corporations Should Consider
In addition to the corporate tax form, there are several other considerations every corporation must make before filing.
Withholding from employees’ wages
Corporations are generally required to withhold federal income tax from their employees under FICA. Both employers and employees are required to contribute a percentage of paid wages to provide for old age, medical, survivors and disability benefits to employees.
State Corporate Tax
Every state will have some sort of corporate tax structure similar to federal corporate income tax. However, there are a few key differences.
State corporate income taxes are generally net income taxes, meaning the portion of the corporation’s gross income that is subject to tax. This is calculated by taking a corporation’s federal taxable income, then making modifications as prescribed by state law.
In general, there are three types of property that may be taxed: real property, tangible personal property, and intangible personal property. A corporation, like any other business entity, is subject to tax on the property it owns.
Real property includes assets such as land, buildings, and structures. Tangible personal property is tangible and can be owned, typically inventory and equipment for corporations. Intangible personal property is things like stocks, bonds, and other monetary obligations. Determining what properties a corporation owns and the applicable tax rate can be time-consuming and difficult to do correctly but with a corporate tax attorney, it may be a bit easier.
What a Minnesota Corporate Tax Lawyer Could Do for You
Our firm is ready and able to respond to all your corporate tax-related issues. Whether you are acquiring a subsidiary, responding to the IRS, or want to plan the next phase of your business, a Minnesota corporate tax lawyer could guide you every step of the way. Set up an appointment to discover how we might help you with your corporate taxes.