Take a tax break today

Corporations are afforded a series of tax benefits and advantages by the IRS, such as:

Income Shifting: The ability to divide income between the corporation and its shareholders in a manner that lowers overall taxes is referred to as Income Shifting. This practice is by far one of the greatest benefits of incorporating a business.

Fringe Benefits: While startup businesses in this unpredictable economy may be less eager to offer fringe benefits to employees, corporations are afforded favorable treatment over non-corporate entities in the area of fringe deductions.

Business Losses: In a corporation, there are no limits or restrictions on the amount of capital or operating losses that a corporation may carry back or forward to subsequent tax years. Unincorporated entities, however, are subject to more stringent rules regarding corporate losses. For example, an individual owning a sole proprietorship cannot claim a capital loss greater than $3,000 unless he or she has offsetting capital gains.

Dividends From Other Corporations: Where a corporation is cash-heavy and shareholders do not desire to withdraw the cash assets, the dividends received exclusion will serve as a great benefit of incorporating. In a nutshell, a corporation can receive dividends from stock it owns in another unrelated corporation 70% tax free. In other words, where an individual may be required to pay taxes on ALL of a $10,000 corporate stock dividend, a corporation that falls within the dividends received exclusion is taxed on only $3000. This gets tricky.so please consult your tax professional before implementing this strategy.

Leasing Assets to your corporation: Leasing your personally owned property (real estate, automobile, or even a domain name) to a corporation may provide tax savings to many individuals. Please note, however, that the IRS will often scrutinize this type of leasing arrangement. Therefore, the lease terms must be fair to both parties in the transaction (to you and to your corporation). This benefit of incorporating is rather similar to the Income Shifting discussed above.

Self-Employment Tax Savings: In an S-Corporation, however, only earnings actually paid out to an owner as compensation for services are subject to payroll taxes. Any money left in the business for reinvestment or distributed to the shareholder as a dividend is not subject to payroll taxes...and not subject to self-employment tax.

OK. Ready for a tax break? If so, go to mycorporation.com or find an accountant near you

Source: http://finance.ducttapemarketing.com/2006/07/tax_a_tax_break.html