A Peek into Corporate Taxation
It’s that time of the year again. Birds are fluttering their wings and colorful flowers are blooming everywhere.
That’s right. It’s summer!
And what better way to refresh yourself than buying an ice-cold bottle of your favorite beer.
Once you step foot in the supermarket, you realize prices have drastically increased because of an increase in demand.
You think to yourself: “Well if I had a beer company, I know what I’d do! I would make prices as low as possible for people to chug on their beers as much as they want!”
Pretty easy solution if you’re a consumer and not a corporation. You see, if you were to run a corporation, you’d have to think about YOUR profits and expenses first. Plus, you’d have to deal with impending corporate taxes.
What Is Corporate Tax?
Corporate tax is levied by the government on corporations. After expenses are deducted, the government imposes an income tax.
However, corporations don’t pay their taxes via bank accounts like consumers. Instead, they pay their dues through several routes.
Read on to find out who bears the burden of a corporate tax.
Who Pays for Corporate Tax?
If you’ve seen the VAT on many of your daily purchases, you’ll realize that a lot of these taxes are collected through consumers.
Let’s say the price of your beer bottle= 20$ x VAT (45%) = 29$
That VAT which equals 45% is the tax imposed on the beer company.
· Lowering employee wages and letting workers pay the price is another way corporations seek to cover their taxes.
· The owners and shareholders might also take the hit through earning lower dividends and decreasing profits.
Gain Advantage from Corporate Tax
Did you know there are different tax structures you can implement for your business?
If you choose to operate as a corporation, you will gain the following advantages:
– Medical insurance for families that can be fully tax-deductible.
– Retirement plans can be set up as fringe benefits which can also be deductible.
– Expanding your business through keeping your profits in the company. This can be accomplished by opting for corporation income tax instead of individual income tax.
On the contrary, if you choose to be a sole proprietor, keep in mind that you will be fully liable for any debts incurred. Also, your profits can take a huge plunge if you don’t manage your finances correctly.
Pro tip: Consult a professional before jumping the gun and making a regrettable decision.
Automation in Corporate Tax
Corporations might not feel the need to use automation in their low-volume tasks, as these can be done manually.
However, when it comes to privacy issues, automation can protect against breaches in data.
No doubt, cloud software that helps in streamlining and securing your transactions is a sure solution. This software allows multiple people to connect at the same time, offers efficient bookkeeping processes while also making sure all data is fully encrypted.
The Importance of Professional Help
Dreaming about your business being prosperous is one of the best feelings ever. However, that haunting feeling of figuring out your taxes can mess with your felicity. For this reason, reaching out to companies that are competent and budget-friendly in corporate tax accounting is a must to manage your accounts payables, your cash flows, and financial statements easily and forget about tax nightmares!