Incorporated businesses are afforded tax benefits from the IRS and state governments which are not available to sole proprietorships and other types of business structures.  Incorporated entities are taxed at a lower rate than most other types of business organizations, or individuals. 

 

A corporation can own shares in other corporations and collect dividends at a greatly reduced tax rate.  A corporate entity can carry any amount of capial loss forward to subsequent tax years.  Sole proprietorships, on the other hand, are severely limited in the amount of capital loss they can claim, and carry forward.  A corporation is afforded preferential treatment for expenses such as  pension plans, savings plans, Insurance and medical costs, capital investment in the business, business travel,  client entertainment, , and the possible tax audit.

Certain types of corporations are allowed to file for S Corporation status. “S” status allows the entity to pass taxes straight through to the owners, thus the entity does not pay taxes, only the owners do.

 

Tax advantages for C-Corporations, S-Corporations, LLCs (Limited Liability Companies), LLPs ( Limited Liability Partnerships), Propietorships, Partnerships, and other types of business structures can be quite different and quite complicated.  A tax professional should be consulted for details and advice as to which entity is appropriate for any particular business situation.