When most people think about starting a business the first thing that will pop into their minds is to create a Florida Corporation. It is the most popular as far as business vehicles. However, what most people don’t know is that if an “S Election” is not made by the Corporation, the Corporation has a double tax.
A “C Corporation” pays a double tax. The first tax that the Corporation pays is on the income that the Corporation is receiving. The second level of tax is when the Corporation pays out a dividend to its shareholders.
With the 2017 Tax Act, the Corporation’s taxes were reduced to 21%. Having a Corporation may be favorable if dividends will not be payed out and the Corporations plans to reinvest its capital. This is in fact much lower than the highest individual rate of 37%.
The Florida Corporation also provides limited liability, but it also has its caveats. The Florida Corporation is more likely to have issues due to Director’s liability and duties to shareholders. In addition, shareholders may request books and records of the Corporation and make it otherwise cumbersome to the Corporation.