How are professional service corporations taxed?
Unlike sole proprietorships, partnerships, and LLCs, professional corporations do not enjoy pass-through taxation, which means the professional corporation pays tax on its profits, and the owners pay tax a second time on the same income on their personal tax returns.
Can professional services be an S Corp?
If you have a professional corporation, you may qualify for pass-through taxation by electing to be treated as an S corporation by the IRS. If your business meets the qualifications, S corporation status allows you to avoid double taxation, thus increasing your net profits.
What taxes do I pay as an S Corp?
All owners of S-corporations need to pay federal individual income taxes (top marginal rate of 39.6), state and local income taxes (from 0 percent to 13.3 percent), and are hit with the Pease limitation on itemized deductions, which adds an additional 1.18 percent marginal tax rate.
How does an S Corp avoid taxes?
Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.
Whats the difference between a corporation and a professional corporation?
A professional corporation is one that only performs services in one, single profession. It is a specific type of corporation for professionals like doctors, lawyers, accountants, etc. The professional is able to form a corporation, but the professional remains liable for his or her own actions.
What is a professional S Corp?
Professional corporations (PCs), or professional service corporations, are a unique corporate structure which is comprised of a specific group of professionals. An S corporation or a C corporation may be formed by certain professionals including physicians, attorneys, engineers, or accountants.
What is the difference between a corporation and a professional corporation?
What type of tax return does a professional corporation file?
To report the income, gains, losses, deductions, credits, and to figure the income tax liability of a corporation. Corporations that elect to be S corporations use Form 1120-S to report income, deductions, gains, losses, etc.
What is a professional S corp?
Who owns a professional corporation?
The owners of a professional corporation are shareholders who own stock in the business, as well as employees who provide professional services for the business. As mentioned above, states differ in terms of whether non-professionals can own stock in a professional corporation.
How does an S Corp avoid self employment taxes?
The S Corp advantage is that you only pay FICA payroll tax on your employment wages. The remaining profits from your S Corp are not subject to self-employment tax or FICA payroll taxes. Those profits are only subject to income tax.
How are professional corporations taxed?
Professional corporations are taxed at the same tax rate as regular corporations, and the owners are required to pay the FICA tax instead of the self-employment tax.
How are S corporations taxed?
That is, the tax on the S corporation is passed through to the owners for federal income tax purposes. Then each shareholder’s share of the profit or loss of the corporation is recorded on a Schedule K-1.
Can a professional corporation be an S Corp?
Can a professional corporation be an S corp? Small businesses often must minimize their tax burden to become profitable. If you have a professional corporation, you may qualify for pass-through taxation by electing to be treated as an S corporation by the IRS.
What is an S corporation?
An S corporation (S Corp) is a special kind of corporation which operates as a corporation but is taxed on the individual shareholders’ tax forms, for federal income tax purposes. In order to become an S corporation, a business: