What you owe in federal taxes for your newly formed or converted Minnesota S corp or C corp would depend on many things, including the size of your company, the nature of your operations and so on. The deductions and credits would also depend on your unique situation. Please read on for a brief review of what you may have to pay as a corporation.
You may want to note before beginning that, though corporations may have some unique benefits, they also have to pay a double tax. Taxation happens on profits when they come in, and then again when you redistribute them as dividends.
Unlike personal income taxes that you may be used to if you have been operating as a sole proprietorship, you may also have to pay a variety of special category taxes for your corporation. According to the IRS, your newly-formed C corporations or S corporations could be liable for the following types of payments:
- Estimated tax for corporations
- Various employment taxes, such as unemployment, social security and Medicare
- Income tax
- Excise taxes, such as those on tanning salons and fuel
This may seem like a lot, but the tax laws may have the potential to benefit you overall. This is because corporations, although they have more complicated requirements, may also benefit from a variety of incentives and tax deductions that could balance the scales.
In short, if you are considering converting your business or starting a new one, taxes should be among your concerns. However, every situation is different. Please do not read any of this as legal advice. It is only meant to inform you of the general situation.