Washington Corporation Advantages and Disadvantages
Washington Corporation Advantages and Disadvantages
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 hasbeen 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 2012 Business Tax Climate Ranks 7th
Washington ranks 7th in the Tax 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.
Tax Freedom Day Arrives on April 16 in Washington
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, Washington taxpayers work until April 16 to pay their total tax bill, ranking it 5th highest in the nation. This is 4 days after national Tax Freedom Day (April 12).
Washington's State and Local Tax Burden Below National Average
Washington's state and local tax burden is currently estimated at 9.3% of income (29th nationally), below the national average of 9.8%. Compared to the 1977 data, Washington had a tax burden of 9.6% (31st nationally), decreasing 0.3% overall. Currently Washington taxpayers pay $4,408 per capita in state and local taxes.
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 not to do so.
Levies Nation's Oldest Gross Receipts TaxWashington's corporate tax structure contains no corporate income tax. Nevada, Texas and Wyoming are the only other states that do not levy corporate income taxes. However, Washington levies the nation's oldest gross receipts tax, the Business and Occupations (B&O) Tax, first instituted in 1933. Washington, Texas, Ohio, Michigan and Delaware are the only states to levy economy-wide gross receipts taxes.
Washington Sales and Excise Taxes
Washington levies a 6.5% general sales or use tax on consumers, above the national median of 5.85%. In 2007 combined state and local general and selective sales tax collections were $2,661 per person, which ranks 2nd highest in the nation. Washington's gasoline tax stands at 37.5 cents per gallon, which ranks 3rd highest nationally. Washington's cigarette tax stands at $2.025 per pack of twenty and ranks 9th highest nationally. The sales tax was adopted in 1933, the gasoline tax in 1921 and the cigarette tax in 1935.
Washington Property Taxes
Washington is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect the majority of property taxes. Washington's localities collected $835.25 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Washington collects more property taxes than most states do. In FY 2006, Washington collected $257.73 per capita, bringing its combined state/local property taxes to $1,092.98 per capita, which ranks 25th highest nationally.
Federal Tax Burdens and Expenditures: Washington is a Donor State
Washington taxpayers receive less federal funding per dollar of federal taxes paid than the average state. Per dollar of Federal tax collected in 2005, Washington citizens received approximately $0.88 in the way of federal spending. This ranks the state 38th highest nationally and represents a decline from 1995, when Washington received $0.97 per dollar of taxes in federal spending (ranked 31st nationally).