Texas Corporation
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There's a lot that can go right and wrong in a business. A lot of it out of your control. But the extent of your personal financial liability for what goes wrong is one thing you can and should control.
The answer is to form an entity separate from yourself to run the business.
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.
Texas Corporation Advantages and Disadvantages
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.
Texas Corporation Advantages and Disadvantages
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.
Texas Corporation Advantages and Disadvantages
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
Texas Corporation Advantages and Disadvantages
Texas' 2011 Business Tax Climate Ranks 13th
Texas ranks 11th nationally in the nations 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.The Facts on Texas's Tax Climate - 2011
Here are some basic facts on Texas's tax system and how it compares to other states:Texas Corporation Advantages and Disadvantages
Tax Freedom Day Arrives on April 7 in Texas
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Texas taxpayers work until April 7 to pay their total tax bill, ranking it 25th highest in the nation. That's 5 days before national Tax Freedom Day (April 12). The Tax Freedom Days of neighboring states are: New Mexico, March 31 (ranked 45th nationally); Oklahoma, April 2 (ranked 41st nationally); Arkansas, April 3 (ranked 35th nationally); and Louisiana, March 30 (ranked 47th nationally).Texas' State and Local Tax Burden Among Nation's Lowest
Texas' state and local tax burden is currently estimated at 7.9% of income (45th nationally), below the national average of 9.8%. Compared to the 1977 data, Texas had a tax burden of 7.9% (48th nationally), remaining relatively constant. Currently Texas taxpayers pay $3,197 per capita in state and local taxes.Texas Levies a Gross Receipts Tax The state of Texas, in addition to collecting no personal income taxes, collects no corporate income taxes. However, Texas recently instituted a gross receipts tax called the Texas Margins tax. It went into effect January 1, 2007. Texas joins Washington, Delaware, Michigan and Ohio as the only states that levy an economy-wide gross receipts tax.
Texas Levies no Corporate Income Taxes
The state of Texas, in addition to collecting no personal income taxes, collects no corporate income taxes. However, Texas recently instituted a gross receipts tax called the Texas Margins tax. It went into effect January 1, 2007. Texas joins Washington, Delaware, Michigan and Ohio as the only states that levy an economy-wide gross receipts tax.
| Texas Corporation Advantages and Disadvantages| Business Partnerships| S Corp vs C Corp| Sub S Corporations| LLCs Listed by State
| Business Deductions| LLC vs S Corp | CORP vs Part/Sole Part | LLCs Taxes
| Business Formation | ICs and IRS | Piercing the Corporate Veil | How to Incorporate
| Delaware Corporation | Corporations Listed by States | S Corporations Listed by States