Washington Corporation Advantages and Disadvantages

Washington Corporation
Advantages and Disadvantages

Washington Corporation

Washington Corporation and Taxes

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

Should I form a Washington 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 Washington 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

Washington�s Business Tax Climate Ranks 9th

Washington ranks 9th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Idaho (31st), Oregon (10th) and California (38th).

Washington�s State/Local Tax Burden above the National Average

Washington State spent most of the nineties with a significantly above average tax burden, which peaked in 1994 through 1995 at 11.7%. In subsequent years however, the state saw this figure fall as individual incomes rose more rapidly than state/local tax collections. Estimated now at 9.9% of income, Washington�s state/local tax burden percentage is 21st highest nationally and just below the national average of 10.0%. .

Washington Levies No Individual Income Taxes

Washington levies no state personal income taxes, joining Alaska, Florida, Nevada, South Dakota, Texas and Wyoming as the only other states to do so.

Washington Levies No Corporate Income Taxes

Washington�s corporate tax structure consists of no corporate income tax. However, the state does impose a gross receipts tax composed of 20 separate rates ranging from 0.011% to 5.029% depending on the type of business activity. Washington joins Nevada, South Dakota, Texas and Wyoming as the only other states who do not levy corporate income taxes.

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