Corporate tax rates refer to the taxes that businesses pay as registered corporations. These may be different rates and values for other forms of businesses, such as a sole proprietorship or partnership. Corporate tax rates are also different than the ones paid by individuals at the end of the year in relation to income.
Corporations are required to pay various taxes, including:
- Income tax: these rates depend on the corporation’s income figures.
- Excise tax: These are taxes on certain goods such as fuel, alcohol, cigarettes, and other regulated items.
- Real estate tax: These are taxes on real property held by the corporation.
- Franchise tax: Franchise taxes are paid to the state where the company is incorporated in.
- Payroll tax: These are taxes based on the company’s employment payrolls.
Thus, corporate taxes are usually fairly complicated, even for newer or smaller corporations. Corporate haven states are states that are considered to have favorable tax rates for corporations, along with other benefits.
There are various factors that can change the rates at which a corporation taxed these include:
- State of incorporation: Choosing where to incorporate can affect specific tax rates, especially the franchise tax that is paid to the state (this will vary according to state).
- Business activities: Non-profit corporations usually have different tax needs due to their involvement with charitable expenses and charitable giving, which are taxed differently than for-profit enterprises.
- C vs. S Corporations: C corporations require the corporation itself to handle taxes; S corporations require the shareholders to pay the taxes. This can translate into radically different tax figures for the company.
Lastly, it is always best to monitor the corporation’s tax documents and to perform regular inspections of tax books and accounting documents. Tax violations can lead to costly penalties for the company, which can drain the corporation’s time and resources. Negligent bookkeeping is sometimes responsible for tax violations and penalties. Intentional tax violations are often punishable under criminal laws.
Certain types of corporate forms may be associated with favorable tax rates. You may wish to hire a tax attorney if you have any questions with corporate tax rates, incorporation, filing, or any other business matters. Your attorney can review your company’s profile to determine if there are any outstanding issues to address. Also, in the event of a dispute or a legal violation, your lawyer can represent you in court.