Avoiding Double Income Taxation Essay

PAGES
2
WORDS
573
Cite
Related Topics:

Northwest Brands Avoiding Double-Income Taxation

Northwest Brands, Inc., is a small business incorporated in Minnesota. Its one class of stock is owned by twelve members of a single family. Ordinarily, corporate income is taxed at the corporate and shareholder levels. Is there a way for Northwest Brands to avoid this double-income taxation? Explain your answer.

Because corporations are considered fictional 'persons' under the law, they are taxed as separate entities. The incomes of their owners (shareholders) and employees (from the most lower-level employees to the members of the boards of directors) are all subjected to income tax. This is called double taxation as income is taxed "once to the corporation itself and then a second time when earnings are paid out to the corporation's owners (shareholders). This is true only for earnings paid out to shareholders in the form of dividends -- that...

...

While the policy of double taxation makes sense when taxing the profits of a large corporate entity which is owned by thousands of shareholders and has an independently-operating CEO, for smaller companies, incorporation could theoretically mean that the organization would be subjected to a considerable disadvantage in terms of tax policy: the income of the owners could be taxed from running the business as well as the income owners derived from holding shares.
However, in the case of Northwestern Brands, Inc. this worst-case scenario is unlikely to transpire. "In practice, this sort of double taxation seldom occurs in a small corporation" (What is double taxation, 2013, Nolo). With a very small company in which the owners make up the entirety of the shareholders, there…

Sources Used in Documents:

References

Double taxation. (2013). INC. Retrieved:

http://www.inc.com/encyclopedia/double-taxation.html

What is double taxation? (2013). Nolo. Retrieved:

http://www.nolo.com/legal-encyclopedia/corporations-faq-29122-8.html


Cite this Document:

"Avoiding Double Income Taxation" (2013, September 11) Retrieved April 23, 2024, from
https://www.paperdue.com/essay/avoiding-double-income-taxation-96041

"Avoiding Double Income Taxation" 11 September 2013. Web.23 April. 2024. <
https://www.paperdue.com/essay/avoiding-double-income-taxation-96041>

"Avoiding Double Income Taxation", 11 September 2013, Accessed.23 April. 2024,
https://www.paperdue.com/essay/avoiding-double-income-taxation-96041

Related Documents

Taxation Impact of taxes on business owners Tax Implications on Salary and Dividend Payments The amount of money that a business takes out has important implication of tax amount that the business will be liable to pay. But for the case of sole proprietorships and partnerships, it makes no difference how much or when the money is taken out of the business. After all, owners of both partnerships and sole proprietorships pay personal

Double Taxation The author of this report has been asked to define and discuss what it means when referring to "double taxation" with a corporation and its shareholders. Some examples of this will be provided as well. After that is established, comments about all of the above will be offered by the author. Double taxation is an interesting condition with some (but not all) corporations whereby the Internal Revenue Service gets

S. domestic law, a U.S. citizen or resident (Non U.S. person) who is a beneficiary of a foreign retirement plan would be subjected to the existing U.S. income taxation on all of the income that is accrued in their foreign investment plans even though their income is never currently distributed per se to the beneficiary. This should be the case unless the foreign retirement plan accounts as the employee's trust

" Since their inception, a number of LLC statutes have been adopted across the country and becaue of the RULLCA initiative, the various jurisdictional disparities are slowly being replaced with more uniform approaches and interpretations. According to Greubner, LLCs have "evolved [into] a more of a distinct form and less of a hodgepodge of existing corporate and limited partnership rules." The LLC, though, remains a relatively new governance regime compared to the

(Rahn, 2004) "German, French, Canadian, or even Swedish company will pay a lower corporate tax rate on profits earned in its home country, and little or no tax to its home government on any foreign income." (Rahn, 2004) In comparison, an Irish company pays twelve percent tax for income in Ireland and nothing on income from abroad. On the other hand a U.S. company doing business in U.S. And Ireland

Flat Tax on Income the
PAGES 6 WORDS 1538

The flat tax is however somewhat higher in the income range from $30,000 to $90,000. For earnings of $100,000 and above the flat tax is lower since the current income tax has higher tax brackets which take effect in those categories. The following chart illustrates the rate at which taxes are presently collected under the current method of taxation and the taxes that would be collected under the Flat Tax