Hi All, I'm new to this forum and require a bit of advice from practicing accountant, I recently moved to the USA and own two companies one is sole member LLC and the other one is C Corp where I'm 100% shareholder. Just wanted to know that if I'm not withdrawing any income from C corp then I shouldn't include anything in my tax return or is there any requirement to include anything on the personal tax return? any help would be highly appreciated.
Advice needed
Answers
The LLC is a "pass-through legal entity". The company is not taxed. the profit/losses are flowing straight through to the owner and reported in the annual Form 1040 to the IRS as business income.
C Corp's are stand-alone legal entities and they are taxed directly by the IRS on their income/(losses) The shareholder does not have to report the income generated by the company until the moment he collects part of that income in form of a dividend.
In other words, C Corporations are subject to double taxation. Profits generated are taxed at a corporate rate and the remaining profit after tax is again taxed at the time of the distribution in form of a dividend by the shareholder.
The only reason you may want to select the C Corp legal status would be if you plan to increase the number of shareholders over 100, plan to raise funds from foreign investors,/ and /or offer different classes of shares.
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