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INCORPORATE YOUR-SELF? Big TAX Benefits.....
SAVE TAXES BY SPLITTING INCOME BETWEEN YOU AND YOUR CORPORATION
Example 5: Let's say you own a small service business, Keep Cool Air Conditioning Repairs. You organize it as a sole proprietorship
with no formal legal paperwork or perhaps as a one-person limited liability company (LLC), which requires a little extra paperwork.
In either case, for tax purposes the IRS treats your business as a sole proprietorship-that is, a business that is not taxed
separately from its owner. At the end of the tax year, you must report and pay individual income taxes on all net profits
of your business on your 1040 individual income tax return.
Let's say you earned net profits of $100,000,but you leave $50,000 of those profits in the business for future expansion needs,
and take$50,000 out for your living expenses. You still must pay taxes on the whole amount-in the year2000, you would pay
individual income taxes of$25,681 on the $100,000 profit. This individual income tax figure can be calculated by multiplying
the income within a certain tax bracket by the applicable individual tax rates (refer to Table 2, Individual Income Tax Rate
Schedule, Schedule X-Single, in Section B, below) as follows:
($26,250 x 15% = $3,937.50)
+ ($37,300 x 28% = $10,444.00)
+ ($36,450 x 31% = $11,299.50)
Individual tax = $25,681.00
Now let's assume instead that your business incorporated, and you split the $100,000 between yourself and your corporation
by retaining $50,000 in your corporation for future expansion needs and paying out $50,000 to yourself as a salary. Now the
overall taxes you owe would be$18,087.50, calculated as follows:
Individual tax on $50,000:
($26,250 x 15% = $3,937.50)
+ ($23,750 x 28% = $6,650.00)
= $10,587.50
Corporate tax on $50,000:
($50,000 x 15% = $7,500.00)
(Individual tax = $10,587.50)+ (Corporate tax = $7,500.00)= $18,087.50
In short, by splitting the same $100,000 of business income equally between yourself and a corporation you save $7,593.50
in total income tax ($25,681 minus $18,087.50). Again, the reason for this savings is that you retained $50,000of business
income in your corporation, where it was taxed at the 15% corporate income tax rate, instead of having it all pass through
to you where it would be piled on top of your other individual income and be taxed at the higher individual tax rates.
Does the same income tax analysis apply to income earned by a co-owned business, like a partnership or a co-owned LLC? Yes.
Like the situation with a sole proprietorship or a one owner LLC, all income of a co-owned unincorporated business is passed
through to the owners for tax purposes, whether or not any income is actually taken out of the business. At the end of each
year, each co-owner must report and pay individual income taxes on the share of business profits allocated to her under the
terms of the partnership or LLC agreement. CYBER COMPUTERS can do it for you.....
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CLICK BELOW TO TALK TO: Dr. Jesse Chatmon...Live!
Sales Office at: Cyber Computers & Consulting 24/7
CLICK BELOW TO INCORPORATE YOURSELF, YOUR CHURCH,MINISTRY, YOUR NON-PROFIT OR OTHER BUSINESS ON-LINE OR CALL ME NOW!
Incorporate your Nonprofit or Commercial Business TODAY!
INCORPORATE YOUR BUSINESS TODAY......
Nonprofit Organizations:
By incorporating a nonprofit association, you can establish legal protection that separates your personal assets from the
activities of the corporation. Don't leave your personal wealth exposed!
The Company Corporation is America's leading provider of business entity formations in all 50 states. We can incorporate your
nonprofit in just ten minutes at the fraction of the cost of using an attorney. Learn more about how incorporating your nonprofit
can help you qualify for tax exemptions, accept donations, become eligible for grant money, and more.
Should I Incorporate my Nonprofit?
4 Reasons to Incorporate your Nonprofit Association
Nonprofit Corporations enjoy an exemption from corporate income taxes on profits from activities related to their purpose.
Qualifying for a tax exemption is harder for associations than for corporations. Without tax-exempt status, your group is
unlikely to qualify for many public and private grants.
Donors can deduct gifts to your group on their federal and state tax income returns once your organization becomes a tax-exempt
nonprofit corporation.
Members and directors of nonprofit corporations are generally protected from personal liability, meaning that their own money,
houses, and cars aren't at risk. That's not true for an unincorporated association.
Forming a Nonprofit Corporation
8 Steps to Form a Nonprofit Organization
Choose a business name.
Incorporate online or by phone with The Company Corporation or have Cyber Computers's local Rep. do it for you!.
Apply for your IRS tax exemption.
Apply for a state tax exemption.
Draft bylaws.
Appoint directors.
Hold a meeting of the board.
Obtain any necessary licenses and permits.
Public Charity or Private Foundation?
Every exempt charitable organization is classified as either a public charity or a private foundation. They are distinguishable
primarily by the level of public involvement in their activities.
Generally, organizations that are classified as public charities have an active program of fundraising and receive contributions
from many sources (including the general public, governmental agencies, corporations, private foundations or other public
charities). Examples include: churches, hospitals, schools, colleges and universities.
By contrast, private foundations typically have a single major source of funding (usually gifts from one family or corporation
rather than funding from many sources). Many offer grants to other charitable organizations and to individuals, rather than
operate charitable programs.All of the following IRS and some local State forms have to be filled-out and filed.LET
CYBER COMPUTERS DO IT FOR YOU ON-LINE NOW!
Tax Forms for Nonprofits and Charities
Form 990, Return of Organization Exempt from Income Tax
Form 990-EZ, Short Form Return of Organization Exempt from Income Tax
Form 1023, Application for Recognition of Exemption for 501(c)(3) Charitable Organizations
Form 1024, Application for Recognition of Exemption for 501(a) Organizations
Form 1120, U.S. Income Tax Return for Certain Political Organizations
Tax Information for Charities & Nonprofits:
IRS Publication 4220, Applying for 501(c)(3) Tax-Exempt Status
IRS Publication 4221, Compliance Guide for 501(c)(3) Tax-Exempt Organizations
IRS Publication 557, Tax-Exempt Status for Your Organization
IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations
Tax-Exempt Organizations E-file Requirements
Tax Exempt Organizations Tax KiT
Cyber Computers makes it easy~!
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Does your Business need A Credit CARD -DO YOU ?
YOU CAN GET A CREDIT CARD!
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