Real Advice from a firm who knows how to lower their clients tax liabilities.
What are the Characteristics of an Idaho Corporation?
Several characteristics differentiate an Idaho corporation from other forms of Idaho business entities. One of the aspects of an Idaho corporation that distinguishes it from a partnership is that it has limited liability for all owners, shareholders, investors. This means that the creditors of an Idaho corporation can lay claim only to the assets of the Idaho corporation. Creditors of a partnership can turn to the personal assets of each owner whenever the assets of the unincorporated firm are not sufficient to meet the creditors’ claims.
Because of this corporate characteristic, an Idaho S-corporation or an Idaho C-corporation is the most widely used business entity in the world.
- Is chartered as a legal and separate entity by an individual state (Idaho)
- Protects the personal assets of the owners against creditors’ claims which is called limited liability
- Can issue capital stock to raise money
- Can issue dividends to stockholders
Here is a quick list of an Idaho C Corporation advantages:
- They can have an unlimited number of shareholders, from anywhere in the world.
- They can have several different classes of shares.
- They have the broadest range of deductions and expenses allowed by the IRS.
They are the most widely recognized business entity in the world and are the premier entity for going public.
Tax Advantage: Wide Range of Idaho Deductions & Expenses
An Idaho C Corporation has the broadest range of deductions and expenses allowed by the IRS, especially in employee fringe benefits. An Idaho C Corporation can set up heavily funded medical reimbursement and other employee benefits, and deduct the costs of running these programs, including all premiums paid. There would be no additional expense to you as an owner/shareholder. However, this is not the case in a flow-through entity, such as an Idaho S Corporation, LLC, or LP. Therefore, if having the maximum deductions and all of the Idaho employee fringe benefits you could ever want on a tax-free basis is essential to you, a C-Corp maybe your entity choice.
Who Idaho C Corporations Benefit & Who Shouldn’t Use Them
Idaho C Corporations are great for almost any Idaho business. But Idaho C-Corporations don’t work well with companies that want to hold appreciating assets, such as real estate, because of the tax treatment on the sale of these assets.
Tax Disadvantage: Double Taxation Issues
The most often-cited disadvantage of using an Idaho C-Corp is the “double-taxation” issue. Double-taxation happens when an Idaho C-Corp has a profit left over at the end of the year and wants to distribute it to the shareholders as a dividend. The Idaho C-Corp has already paid taxes on that profit. Still, once it spreads the benefit to its shareholders, those shareholders will have to declare the dividends they receive as income on their personal tax returns, and pay taxes again, at their own personal rates.
How to Avoid the Double-Taxation Scenario
Structure the Idaho C-Corp so that there is no profits leftover, use all the write-offs and deductions allowed by the IRS to reduce the Idaho C-Corp’s net income. Offer top of the line fringe benefits to yourself and find ways to get rid of the money. It is that simple!