What are the disadvantages of incorporating a business?
A. The primary disadvantage of incorporating a business is the “double taxation” where the profits of a corporation are taxed twice: first as income to the corporation, then as income to the shareholder when the profits are distributed in dividends. However, reasonable business expenses, such as salaries are deductions against corporate income, can minimize the “double tax”. In addition, the double tax can be eliminated by making an S corporation election by filling out and filing a Form 2253 with the IRS or having ALLCORP FILINGS, L.L.C. prepare it for you.
A. The primary disadvantage of incorporating a business is the “double taxation” where the profits of a corporation are taxed twice: first as income to the corporation, then as income to the shareholder when the profits are distributed in dividends. However, reasonable business expenses, such as salaries are deductions against corporate income, can minimize the “double tax”. In addition, the double tax can be eliminated by making an S corporation election by filling out and filing a Form 2253 with the IRS or having Nevada LLC Solutions prepare it for you. Other disadvantages of incorporating a business include: Complexity and expense of forming a corporation. Extensive record keeping requirements. Operating a corporation across state lines requires the corporation to qualify to do business in the other state.
