Chapter 16 Corporations
Chapter 16 Corporations
Learning Objectives Define a corporation Calculate the corporate income tax liability and explain specific tax rules Apply the non-recognition of gain or loss rules for corporate formations
Learning Objectives • Define a corporation • Calculate the corporate income tax liability and explain specific tax rules • Apply the non-recognition of gain or loss rules for corporate formations
Learning Objectives Understand the significance of earnings and profits Determine the consequences of distributions and stock redemptions Understand the consequences of a corporate liquidation to shareholders and the liquidating corporation
Learning Objectives • Understand the significance of earnings and profits • Determine the consequences of distributions and stock redemptions • Understand the consequences of a corporate liquidation to shareholders and the liquidating corporation
How A Business May Be Organized Sole Proprietorship c(regular) Corporation S Corporation Partnership Limited Liability Partnership -LLP Limited Liability Company -LLC
How A Business May Be Organized • Sole Proprietorship • C (regular) Corporation • S Corporation • Partnership • Limited Liability Partnership - LLP • Limited Liability Company - LLC
Major Types TAXABLE ENTITIES FLOW-THROUGH Sole proprietorship OR CONDUIT OR c corporation PASS-THROUGH ENTITIES s corporation Limited Liability Companies Limited Partnerships Partnership
Major Types • TAXABLE ENTITIES – Sole proprietorship – C corporation • FLOW-THROUGH OR CONDUIT OR PASS-THROUGH ENTITIES – S corporation – Limited Liability Companies – Limited Partnerships – Partnership
Taxation of Businesses Income from sole proprietorships and flow-through entities is taxed once at the individual owner level while corporate income is taxed twice once at the corporate level and again at the shareholder level upon dividend distributions or stock sales
Taxation Of Businesses • Income from sole proprietorships and flow-through entities – is taxed once at the individual owner level while corporate income is taxed twice, – once at the corporate level – and again at the shareholder level upon dividend distributions or stock sales
Define A Corporation a business entity with two or more owners is classified as either a corporation or a partnership a business entity with one owner is classified as a corporation or a sole proprietorship
Define A Corporation • A business entity with two or more owners is classified as either a corporation or a partnership • A business entity with one owner is classified as a corporation or a sole proprietorship
Define A Corporation a business entity is a corporation if it is organized under a federal or state statue that refers to the entity as incorporated or as a corporation If a business entity incorporates, it is a corporation
Define A Corporation • A business entity is a corporation if it is organized under a federal or state statue that refers to the entity as incorporated or as a corporation • If a business entity incorporates, it is a corporation
Define A Corporation If a business forms itself as a Partnership, Limited Liability Company (LLc) Or Limited Liability Partnership(lLP), the entity can elect to be taxed as either a partnership or corporation
Define A Corporation • If a business forms itself as a Partnership, Limited Liability Company(LLC) Or Limited Liability Partnership(LLP), the entity can elect to be taxed as either a partnership or corporation
Similarities of Individuals and Corporations Similar computation of taxable income Allowed to deduct ordinary and necessary business expenses Can deduct interest and depreciation
Similarities Of Individuals And Corporations • Similar computation of taxable income • Allowed to deduct ordinary and necessary business expenses • Can deduct interest and depreciation
