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Taxes play a significant role in the well-being of a business, especially in its early years. Each type of business gets taxed differently, and it’s important to know how. Professionals at High Point and Greensboro, North Carolina accounting firm Sharrard McGee & Co PA advise that taxes need to be taken seriously when starting a business. Setting things up incorrectly can leave you facing a nasty bill when taxes are due, which is why you should consult with a business accountant before committing to a business model.

5 Types of Businesses & Their Tax Laws

1. LLC

An LLC is an excellent way to simplify your business while also covering yourself during tough times. LLCs can choose to be treated as corporations, but usually opt for partnership-related taxation. This means that “pass through” taxes will be paid on the owner’s personal tax return rather than on a business tax return.

2. Sole Proprietorship

With sole proprietorships, the owner and their services are the business. This keeps things streamlined and simple, both on a day-to-day basis and at tax time. Since the owner is the business, the business is not taxable, and any income should be filed on their personal tax return.

3. General Partnershipbusiness-accountant-sharrard-mcgee-and-co-pa

General partnerships contain two or more owners who are considered the business” The IRS doesn’t view this as a taxable business, so all income is distributed to partners to file on their returns. Terms need to be established for how this money is distributed, as lost income can create problems. Individual taxation can also differ from partner to partner, so speak with a tax advisor if you’re unsure how to handle this.

4. C Corporation

C corporations are treated and taxed as a business entity. Corporate income tax rates are different from individual rates and require detailed accounting and financial services. Income distribution gets more complicated as dividends are paid to each owner of the business, including public stock owners. These dividends are taxed as well, alongside any salaries owners take from the corporation’s income.

5. S Corporation

S Corporations take all the benefits of a corporation and bypass corporate income tax by being taxed like an LLC. Owners of the business distribute the income among themselves and shareholders to be taxed on an individual level. Again, this varies from person to person and is best handled by a business accountant.

If you’re considering starting a business or are already operating, turn to the business accountants at Sharrard McGee & Co PA. They offer accounting services for a variety of business entities and can help ensure your numbers are in order when tax time rolls around. Call (336) 884-0410 today to schedule an appointment at their High Point location or call (336) 272-9777 for their Greensboro office. You can also visit their website and Facebook to learn more.

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