Basics of Business Taxation

1. Entity level taxation.  The Corporate entity pays tax on the business earnings.  The shareholders pay tax on dividends received from the business.  This taxation system applies the "C corporation" (C-corp).  The taxation of business earnings and dividends from the business is frequently referred to as the "corporate double tax."  There are valid reasons to pick C-corp status.  Taxes filed on Form 1120.                                                                                      
2. Pass-through taxation. The entity (called a "pass-through" entity) is not taxed.  Rather, the business owners are each taxed on their proportionate share(s) of the business earnings.  Thus, the business earnings are passed through to the owners.      

• Partnerships, general and limited - (Form 1065) 
• "S corporations" (S-corp) - (Form 1120S)  
• Limited liability companies (LLC) - (Generally filed Form 1065; however the LLC can elect to file Form 1120 or Form 1120S)

1. Personal Property Taxes - Ohio/County Form 920 (being phased out in Ohio and replaced with the Ohio CAT tax).  Check with us regarding other states.
2. Real Estate Taxes - assessed at the County level.
3. Commercial Activities Tax (CAT) - New in Ohio and Kentucky, a tax on gross receipts.
4. Sales Taxes and Use Taxes - Businesses collect this tax imposed on consumers.
5. School District Taxes

• Social Security and Medicare - employer and employee pay these two.
• Federal withholdings - employee
• State withholdings - employee
• City or local withholdings - employee
• Federal unemployment - employer paid
• State unemployment - employer paid
• Workers' Compensation - employer paid
• Don't forget other payroll related items - 401(k) deductions, Sect. 125 deductions, HSA, HRA, United Way, Fine Arts, etc., etc.