Limited Liability Companies For Dummies By Jennifer Reuting

In 1999, the FCC relaxed its ownership rules and allowed one company to own two stations in the same market starting in 2001. This development brought the Sinclair-Glencairn arrangement to light for the first time. At the time, Glencairn was getting ready to buy Sullivan-owned KOKH-TV in Oklahoma City, Oklahoma, where Sinclair already owned KOCB . When the FCC relaxed its rules, Sinclair simply replaced Glencairn as the buyer for KOKH. Glencairn then announced plans to sell five of its stations to Sinclair outright.

It later emerged that Glencairn was to be paid for the proposed purchases with Sinclair stock, and that the Smiths controlled almost all of Glencairn’s stock. Eventually, the FCC placed a $40,000 fine against Sinclair for illegally controlling Glencairn. The multinational security corporation Blackwater Worldwide was reported to have obtained over thirty dummy corporations to secure million dollar contracts from the United States government. After the backlash from Blackwater’s “reckless misconduct” in Iraq, the security corporation successfully obtained lucrative American contracts under several subsidiaries. Essentially, a company appoints a liquidator who sells the corporation’s assets. The company pays any creditors and distributes any remaining money to the shareholders.

Accounting Accounting software helps manage payable and receivable accounts, general ledgers, payroll and other accounting activities. Business Checking Accounts BlueVine Business Checking The BlueVine Business Checking account is an innovative small business bank account that could be a great choice for today’s small businesses. Air Asia was a CIA proprietary headquartered in Taipei that once ran the “largest airplane maintenance facility in Southeast Asia” during the Vietnam War. Although the CIA sold the subsidiary in February 1975, it once served all of the United States Air Force serviced in East Asia, and carried out covert aircraft operations centred in the Pacific. As of 1994, Air Asia is owned by the Taiwan Aerospace Corporation . Glencairn, Ltd was an American company used by the Sinclair Broadcast Group to operate virtual duopolies during the 1990s when legal duopolies weren’t legal by the Federal Communications Commission. The initial capital was supplied by Carolyn Smith, wife of Sinclair founder Julian Smith and mother of current Sinclair CEO David Smith.

What Listeners Say About Limited Liability Companies For Dummies

The S corporation tax structure has a lot to offer small businesses with active owners. Before you file your small business taxes next year, consider electing S corp status. S corporation shareholder-employees must collect a salary, which is subject to FICA taxes. When there’s extra income to distribute, shareholder-employees can receive dividends, which aren’t subject to FICA taxes. Federal and state income taxes still apply on all earnings, but shareholder-employees stand to avoid 15.3% in taxes on dividends received. Many LLC owners, called members, elect S corp status so they can be classified as employees of their organization. Unlike other pass-through entity types, S corporation shareholders who actively participate in management can also be considered employees.

As the owner of a C corp, any income that makes it to your personal bank account gets taxed twice. S corporations are pass-through entities with special tax advantages. File your S corporation taxes by following The Blueprint’s five steps. Compared to other business structures, it’s expensive to start and run a C corporation. Depending on how the company is set up, it could potentially cost thousands of dollars to get a certificate of incorporation. That’s in addition to the ongoing fees required to maintain it.

If bad things happen to your business, the corporation’s money is on the line. 396, was a court case heard before the Court of Appeals in the state of New York concerning the legal usage of dummy corporations to hide the true owner of assets between two companies. The court ruled in favour of Fraw Realty, as the brothers relinquished their constructive trusts as their agreement was not explicitly stated. Dummy corporations may be created to avoid tax through disguising the true profits of a corporation through the use of tax havens. The use of tax havens are particularly popular in the British Virgin Islands and many dummy corporations are created on the islands as a way to evade taxes.

The board of directors executes the corporation’s business plan. Although the members of the board are not personally responsible for the corporation’s debts, they owe a duty of care to the corporation and can incur personal liabilities if they neglect this duty. A corporation is legally a separate and distinct entity from its owners.

As an S corp shareholder, you pay income tax on two types of income — your salary and your portion of S corp earnings. You’ll often hear these referred to as W-2 and K-1 income, respectively. Although S corporations don’t pay entity-level tax, they still file business tax returns, called information returns.

Tax Benefits Of Filing As An S Corporation

If you want to discover everything you need to know about LLC’s and if they’re right for your business then keep reading…Do you want to discover the power of Limited Liability Companies? If you are starting or have your own business, you quite simply must understand how LLC’s work! This audiobook has been designed specifically to outline everything you need to understand in a structural manner. IRS Forms 940 and 941 must be filled out to ensure you’re paying employment taxes.

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corporations for dummies

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Becoming A Corporation

TurboTax is one of the most recognizable names when it comes to tax software, with good reason. They offer a variety of plans ranging from free, for simple returns, to business, for corporations. Before you file your business tax return, you should complete and issue Forms W-2 for all employees. Form W-2 reports employee compensation and how much the employer withheld in FICA taxes during the year. They’re S corporations for tax purposes, but they started as either C corporations or LLCs, two structures that afford limited liability to owners. It’s important to note that S corps don’t always triumph in the S corp vs. C corp battle.

  • With limited liability, the personal assets of corporate shareholders are protected from the claims of corporate creditors.
  • With fully up-to-date accounting basics for business and personal finances, this audiobook will help you to balance your books and stay in the black.
  • It also means that the corporation can own assets, sue or be sued, and borrow money.
  • The IRS pays special attention to S corporation shareholder-employees to deter abuse of that classification.
  • When the FCC relaxed its rules, Sinclair simply replaced Glencairn as the buyer for KOKH.

This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level. The downside of C corporations existing as separate tax entities is that they are subject to tax at both the personal and corporate level . After a company’s profits are taxed as corporate income, they’re paid out to shareholders. The shareholders are required to report the amount they received on their personal income tax returns, and pay taxes on it. S corporations and other pass-through entities cut out the entity-level tax, passing all income tax liability to the owners, called shareholders. If an S corp has $100,000 in taxable income, all $100,000 gets taxed on the shareholders’ personal income tax returns.

However, some corporations, such as charities or fraternal organizations, are nonprofit or not-for-profit. Almost all large businesses are corporations, including Microsoft Corp., the Coca-Cola Co., and Toyota Motor Corp. Some corporations do business under their names and also under separate business names, such as Alphabet Inc., which famously does business as Google. UpCounsel is an interactive online service that makes it faster and easier for businesses to find and hire legal help solely based on their preferences. We are not a law firm, do not provide any legal services, legal advice or “lawyer referral services” and do not provide or participate in any legal representation. A marketing plan should tell readers what the plan is to reach the business’ potential market, including advertising, packaging, web marketing, distribution, and more.

When you create a corporation, you have created a legal person — it’s not an extension of its individual officers, directors, or shareholders. The process of owners paying taxes works differently for corporations and S corporations. Corporations pay their own taxes, and the owners may be taxed on the dividends they receive or on their employment income, if they work as employees in the corporation. Did you know the typical small business owner works three to four months just to earn enough profit to pay taxes?

How To Use Limited Liability Companies And Limited Partnerships

In the 1980s and 1990s, new forms of doing business emerged, all focused on extending limited liability protection to a new type of business entity. Limited liability companies and limited liability partnerships are perhaps the best known from this period. Suddenly, business enterprises existed that could provide the limited liability benefit of corporations and the pass-through taxation of partnerships.

Taxes For Small Businesses Quickstart Guide

Officers, directors, and incorporators had to meet certain qualifications. The corporations themselves had a limited period of existence. Corporate powers had to be set forth in the articles of incorporation.

Articles Of Incorporation

A corporation elects a board of directors, conducts annual meetings, and adopts bylaws. The process can be complex and lengthy, depending on the state in which it incorporates. Some, if not all shareholders in an S Corp can be employed by the business and pay themselves a reasonable compensation for the work done. Once you’ve elected to be taxed as an S Corp, the status will last for five years, after which point you must submit another form to continue being taxed as a small business corporation. Businesses must decide if they want to be an S-corporation and pass through any taxable income to their stockholders, which will leave the stockholders with taxable income.

Although the tax havens itself are not illegal, the avoidance of taxation through the vehicle of tax havens are inherently illegal. To form a corporation in the U.S., it is necessary to file articles of incorporation with the state in which it will be registered. Usually, incorporation is immediately followed by the issuance of stock to the corporation’s shareholders.