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Taxation of Corporation vs. Partnership vs. S-Corporation

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Tax collage of words

Taxation of Corporation vs. Partnership vs. S-Corporation

Topic*
Partnership Taxation
Corporate Taxation
S-Corporation Taxation
* Note that some of these items have exceptions depending on your particular situation.
Taxation rules
Subchapter K
Subchapter T
Subchapter S
Governing documents
Articles of organization (LLC)
Operating agreement
Articles of incorporation
Bylaws
Articles of incorporation
Bylaws
Tax forms
1065
1120-C
1120-S
Allocation of patronage
K-1
1099-PATR
K-1
Taxation of owners
K-1, Self -employment tax
20% pass through business deduction
Quarterly estimated tax needed
W-2, 1099-PATR
20% pass through business deduction
Quarterly estimated tax possibly needed on 1099-PATR
1099-PATR likely not subject to self-employment or other employment taxes
W-2, K-1
20% pass through business deduction
Quarterly estimated tax possibly needed on profits
K-1 profits not subject to self-employment or other employment taxes
Tax return filing
Quickly, need K-1
Can delay to make patronage decision
Quarterly estimated tax
Pay co-op tax through IRS EFTPS
Quickly, need K-1
Deferral of taxes
No
Patronage dividend deducted by co-op in year earned
Patronage dividend is taxed to recipient in the year paid
No
Due date
March 15th
Extended – September 15th
September 15th (8.5 months) – if issuing patronage dividends
April 15th (3.5 months after year end – with exceptions)
Extended October 15th (6 months)
March 15th
Extended – September 15th
Late filing penalties
$195/partner/month
Plus state penalties
% of taxes due
State – % of taxes due plus possibly additional late filing penalty
$195/partner/month
Plus state penalties
Federal
No entity level taxes
Taxes on net income
No entity level taxes
States
May be fees or taxes
Taxes on net income
May have minimum state taxes
May be fees or taxes
Multi-state – Co-op
File where there is nexus
File where there is nexus
File where there is nexus
Multi-state – Owners
Owners may need to file in each state where co-op files
Owners file where they live and/or work
Owners may need to file in each state where co-op files
Set up payroll
Maybe not, owners not employees
Probably, owners are likely employees
Probably, owners are likely employees
Unemployment taxes
Not applicable to owners
Likely applicable to owners
Possibly applicable to owners
Equity
All to owners
May have classes of owners
Co-op may have equity
Owners may have equity
May have classes of shares, preferred shares
All to owners
Only one class of shares
Only individuals may be owners
Permanent equity
No. All belongs to owners.
But may set up corporate owner
Yes. Retained earnings.
No. All belongs to owners.
May not set up corporate owner
Profit allocation
Allocation can vary from ownership %
Non-members can be included with profit sharing system outside of K-1s
Allocation can vary from ownership %
Non-members can receive patronage dividend
Allocation must follow ownership %
Non-members can be included with profit sharing system outside of K-1s

 

 


About the Author

Bruce Mayer

Bruce Mayer, MBA, CPA currently serves as a Partner in the Assurance Department, working primarily on audits and tax returns of cooperatives, nonprofits, employee benefit plans and commercial businesses.  Bruce performs audits of all kinds and provides consulting services on taxation of nonprofits and cooperatives.  Bruce enjoys helping clients solve problems and providing clients advice on accounting and tax strategies that meet their needs.


 

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