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.