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Different business structures have different tax requirements

On behalf of Law Office of Clifford J. Hunt, P.A. posted in business formation and planning on Wednesday, October 31, 2018.

Taxes are a part of life for Florida residents and the same holds true for business entities that operate in the state. Just as individuals may be taxed on their earnings, many businesses are required to report their incomes and pay taxes on their profits. However, the tax rules that a business will be held to follow will greatly depend upon the structure the business has chosen for its operations.

Prior posts on this blog have discussed the differences between popular structures like sole proprietorships, limited liability companies and partnerships. This post will offer general information on how those different structures may be subject to taxation but as with all information contained on this blog, readers are reminded that no legal advice is imparted herein.

If a business is organized as a sole proprietorship its tax implications are directly tied to those of its owner. Sole proprietorships are not distinct from their owners so therefore it is up to the owner to include the business’s taxable information on their own personal tax return. Similarly, partnerships do not require their own tax returns but the owners of a partnership must report their shares of financial data on their individual returns.

A corporation may have to file its own tax return if it has more than 75 shareholders. If it does, it is considered a C corporation and is liable to report its earnings. Individual shareholders are required to report their corporate earnings on their own tax documents. Corporations with fewer than 75 shareholders are considered S corporations and they do not have to file their own tax returns as shareholders include their earnings and losses on their own tax documents.

Knowing the tax implications of a business structure is important before a new entity is brought into existence. Business law attorneys are available to help individuals understand how their new entities may be subject to tax laws once they are in operation. This information can help business owners make decisions that are in the best interests of their business.

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