One of the best ways to obtain favorable tax advantages for businesses is by incorporating the company. There are a variety of options available for business owners with different tax implications for each.
Writing for Business Insider, Deborah Sweeney, says that if business owners fail to incorporate their companies, the IRS will label it as a sole proprietorship. As a result, when filing taxes for businesses that have not been incorporated, individuals will need to file a Schedule C tax return, which is the second most audited form.
The tax benefits vary depending on how a business decides to incorporate.
"While all business structures are more tax friendly than a sole proprietorship, not all structures are as good as an S Corporation," Sweeney wrote for the publication. "In general, the corporation is typically the most tax friendly structure, but provides some inflexibility in operating. The LLC provides the most operation flexibility, but can result in some unfavorable tax results."
States around the country have been setting up ways for corporations to get tax advantages for filing as an LLC. The Douglas Dispatch reports that Republicans in Arizona's legislature have been pushing to decrease property taxes for corporations from 21 to 18 percent.