Updated July 27, 2015
What Is Corporation Tax Chicago Illinois
There are many different types of corporations from an Income tax standpoint. The two most prevalent are regular corporations and s corporations.
A regular corp or c corp at the federal level has double income taxation or two layers of tax. If the corporation shows a profit, then the business will pay a federal corporate tax at the appropriate rate on the year that it was earned. But there is also a secondary tax which in most cases adds a second layer of tax. Whether the ownership takes out the income or leaves it in the company, there is a second layer of income tax at the federal level and most states.
An s corp only has one layer of federal income taxes. All profits or losses flow through to the shareholder’s income tax returns on the tax year that they are realized. Since the tax flows through to the personal return on a K-1, there is no federal corporate tax. All payments are made on the individual owner’s personal income tax returns. In most cases, this can save an enormous amount of tax over several profitable years.
But these matters are not simple. They are, in fact, incredibly complicated and form the basis for the proper tax planning of an entity.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.