Ideal Circumstances For A Regular Corporation
- The owners withdraw all the profits from the company through salaries or other benefits.
- Profits after owners’ salaries are relatively low and they are regularly reinvested in non-deductible expenditures or depreciable assets.
- Publicly traded companies.
- The owner desires to “distance” his or her personal taxes from that of the company.
- The business owns stock in other corporations that pay annual dividends.
- Passive investors who will receive dividends taxed at preferential rates.
Reasons Not To Operate As A Regular Corporation
- Owners want losses to flow to shareholders.
- Tax problems can result from “excessive” salaries to the owners.
- Corporate income would be taxed at a lower rate if taxed directly to the shareholders.
- The company generates capital gains.
- Related regular corporations have to share many tax benefits.