How do I avoid double tax?

vail310 · Apprentice Joined: 25 Jun 2007 Posts: 7

I have considered starting a C corporation and there are some of the things I need to know before making a decision. What interests me the most is what is how to avoid double tax exactly, as I would hate having to pay what is not at all necessary. Thanks in advance.

darrel · Apprentice Joined: 09 Jun 2007 Posts: 11

To say in short, being a C corporation is less expensive if you are doing your job well, whereas it can cost you much if you become liable because of some error. In short, you could lose all your money.There are also tax breaks for, but that indeed will not do you much good if you have to pay double tax. It is a famous ''tax trap'' which happens when you have to pay taxes on your income as a company, ad also on your dividends, as a shareholder. In order to avoid that, you may either inform your tax office you will register as an S corporation, or you can distribute your income in such a way that each part does not exceed level which requires paying taxes. For some specifics, I suggest you go to http://www.answerbag.com/q_view/146.