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Blogging Beyond the Numbers

Taxation of Corporation vs. Partnership vs. S-Corporation
Posted by: Bruce Mayer 1 week ago

Taxation of Corporation vs. Partnership vs. S-Corporation

Topic*Partnership TaxationCorporate TaxationS-Corporation Taxation 
Taxation rulesSubchaper KSubchapter TSubchapter S
Governing documentsArticles of organization (LLC)
Operating agreement
Articles of incorporation
Bylaws
Articles of incorporation
Bylaws
Tax forms10651120-C1120-S
Allocation of patronageK-11099-PATRK-1
Taxation of ownersK-1, Self -employment tax
20% pass through business deduction
Quarterly estimated tax
W-2, 1099-PATR
Profits on 1099-PATR likely not subject to self-employment tax
W-2, K-1
K-1 profits not subject to self-employment tax
20% pass through business deduction
Quarterly estimated tax
Tax return filingQuickly, need K-1Can delay to make patronage decision
Quarterly estimated tax
Pay co-op tax through IRS EFTPS
Quickly, need K-1
Deferral of taxesNoPatronage dividend deducted in year earned
Patronage dividend is taxed in the year paid
No
Due dateMarch 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. May be additional late filing penalty.
$195/partner/month
Plus state penalties
FederalNo entity level taxesTaxes on net incomeNo entity level taxes
StatesMay be fees or taxesTaxes on net income. May have minimum state taxes.May be fees or taxes
Multi-state - Co-opFile where there is nexusFile where there is nexusFile where there is nexus
Multi-state - OwnersOwners may need to file in each state where co-op filesOwners file where they live and/or workOwners may need to file in each state where co-op files
Set up payrollMaybe not, owners not employeesProbably, owners are likely employeesProbably, owners are likely employees
Unemployment taxesNot applicable to ownersLikely applicable to ownersPossibly applicable to owners
EquityAll 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 equityNo. 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 allocationAllocation 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

* Note that some of these items have exceptions depending on your particular situation.

 

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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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