Using Internet websites such as https://www.irs.gov/ or other similar resources related to partnerships and corporate taxation, write a four to five (4-5) page paper in which you do the following:
Compare and contrast the tax rules and treatment applicable to corporations and partnerships. Indicate the major way in which the tax treatment affects the shareholders or partners.
Explain at least two (2) reasons why a business owner might opt to become a partnership over a corporation. Provide support for your rationale.
Imagine that you are a consultant and make the recommendation that the most advantageous business structure is a C-corporation. Justify why you would recommend a Corporation over a Partnership. Indicate tax rules that influenced your decision.
Analyze what a business owner must consider when deciding what type of entity is best for the goals and vision of the business. Provide at least two (2) examples of research the owner must perform to ensure the proper election is made. Provide support for your rationale.
Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and other websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Note: Please refer to the APA template in the course shell for more information on APA style.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length on Partnerships and corporate taxation.
The specific course learning outcomes associated with this assignment are:
Examine the tax rules that are unique to corporations, and the basic concerns relevant to shareholders and the corporation.
Examine the tax rules and treatment related to partnerships.
Use technology and information resources to research issues in corporate federal taxation.
Write clearly and concisely about corporate federal taxation using proper writing mechanics.
TO BE RE-WRITTEN FROM THE SCRATCH
Comparison of Partnership and Corporation Taxation
Determining legal organization structure is one of the most important decisions when establishing a business structure because; it will affect transferability, operational efficiency, financial reporting, personal liability, and taxation. Making the choice of the business structure may be complicated and the errors can be costly because the current tax laws make it hard to change the tax laws after the business starts operating. Two most common legal organization structures are corporation and partnerships. Comparing and contrasting applicable tax rules and treatment to partnership and corporation is crucial in ensuring that the investors make the correct investing decisions.
Comparison of Tax rules applicable to corporation and partnership
A corporation is a legal business entity that has its own identity separate from the owners or the shareholders. In partnership, on the other hand, there is no legal separation from its shareholders (Nonprofit Business Advisor, 2016).A corporation is considered as a tax payer according to IRS (Internal revenue Service and is required to file its annual income tax return under its own name and the identification number of the employer; partnership on, the, another hand, is not a taxpayer according to IRS, and it operates personal responsibility and legal name of the partners. Another difference is that corporations are required to pay taxes at the established corporation tax rate unless it meets IRS requirements of S-Corporation; however, a partnership does not pay its taxes as a business entity, but the profits and losses on the individual income are reported and tax payments are made based on individual tax rates.
How the tax treatment affects the partners and the shareholders
Corporations are required to distribute the surplus to shareholders as dividends after the payment of corporate tax. The dividends paid are determined by the number of shares held by each shareholder (Rupert, Pope, Anderson & Bandy 2017).Rupert, et, al further narrates that after receiving the dividends, the shareholders are required to file the payments individually and then pay the individual tax rate on the distribution, which causes the double taxation of the profits. The double taxation affects the shareholders because the shareholders pay taxes on both the individual level and the corporate level.
IRS considers the partners as being in self-employment, not a business; thus any payment or compensation that the partner receives is advancement…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. Partnerships and corporate taxation
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