Georgia Corporation Advantages and Disadvantages

Georgia Corporation Advantages and Disadvantages - Articles of Incorporation must be drafted and submitted to the Georgia Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your Georgia Corporation has been formed and this begins its existence as a Georgia corporate entity.

Should I form a Georgia Corporation?

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages and Disadvantages:
Georgia Corporation

Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

Disadvantages of a Corporation

The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations

Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon
Form 4625 Depreciation

Georgia's 2009 Business Tax Climate Ranks 27th

Georgia ranks 27th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Tennessee (17th), Alabama (21st), Florida (5th), South Carolina (25th) and North Carolina (39th).

Georgia's Individual Income Tax System

Georgia's personal income tax system consists of six separate brackets with a top rate of 6% kicking in at an income level of $7,000. That top rate ranks 21st highest among states levying an individual income tax. In 2006, individual income tax collections were $872 per person, which ranked 24th highest nationally.

Georgia's Corporate Income Tax System

Georgia's corporate tax structure consists of a flat rate of 6% on all corporate income. Among states levying corporate income taxes, Georgia's top rate ranks 36th highest. In 2007, state-level corporate tax collections (excluding local taxes) were $108 per capita, ranked 41st highest nationally.

Georgia's State/Local Tax Burden Slightly Above National Average

Estimated at 9.9% of income, Georgia's state/local tax burden percentage ranks 16th highest, slightly above the national average of 9.7%. Georgia taxpayers pay $3,735 per capita in state and local taxes. Since 1977, Georgia has risen 20 places in the rankings.

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