North Carolina Corporation
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Advantages and Disadvantages
North Carolina Corporation
Advantages of a 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
North Carolina's 2009 Business Tax Climate Ranks 39th
North Carolina ranks 39th in the Nation'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), Georgia (27th), South Carolina (25th) and Virginia (15th).North Carolina's Individual Income Tax System
North Carolina's personal income tax system consists of three brackets, with a top rate of 7.75% kicking in at an income level of $60,000. Among states imposing personal income taxes, North Carolina's top rate ranks 12th highest nationally. North Carolina's 2006 income tax collections were $1,079 per person, which ranks 13th highest in the nation.North Carolina's Corporate Income Tax System
North Carolina's corporate tax structure consists of a flat 6.9% rate. Among states levying corporate income taxes, North Carolina's top rate ranks 27th highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $175 per capita, ranking the state the 21st highest nationally.North Carolina's Sales Tax Rate below National Median; Cigarette Tax Relatively Low
North Carolina's state sales tax rate stands at 6.75%, above the national median of 6%. State and local governments combined collected $773 per capita in general sales taxes in 2006, which ranks 34th highest nationally. North Carolina's gasoline tax is variable and currently stands at 30.2 cents per gallon, which ranks 14th highest nationally. North Carolina's cigarette tax stands at 35 cents per pack of twenty and ranks 47th highest nationally. The sales tax was adopted in 1933, gasoline tax in 1921, and the cigarette tax in 1969.North Carolina Property Taxes: Comparatively Low
North Carolina's localities collected $796.12 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. North Carolina is one of the 13 states that collect no state-level property taxes. Its per capita property tax collections in FY2006 rank 38th nationally.Home | North Carolina Corporation Advantages Disadvantages | Site-Map