Video: Introduction to Tax Treatment of Corporations

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In this lesson, explore the key characteristics and tax implications of C-Corporations with Nick Palazzolo, CPA, who brings a touch of humor to the serious subject of double taxation. Nick breaks down how profits of C-Corporations face taxes at both the corporate and shareholder levels, but despite this, there are significant advantages, such as limited shareholder liability. The lesson delves into the separation of legal identity between shareholders and the corporation, highlighting the protection from personal asset seizure in case of corporate debt issues. Nick's engaging explanation clarifies the pros and cons of operating as a C-Corporation, complementing the information covered in the previously discussed business structures lesson.

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Video Transcript

Instructor:Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

Cite this lesson

Diving into C-Corps, we see that C-Corporations are a unique type of business entity. I mean, hey, which business entity is not unique? They're all special in their own way. And this one's going to be subject to double taxation, which you might say, well, that sucks, right? That's their primary disadvantage. And I totally agree with you. Profits for C-Corporations are going to be taxed at the corporate level, meaning you have income minus deductions or expenses. You get net income and you get taxed on that. And then that money, once it's taxed, gets distributed to shareholders. And if you've ever been a shareholder of even a share of stock you got from a grandparent when you were in second grade, you know you got to pay tax on that. I know you were probably thinking about taxes in second grade, as I was. Totally normal, right? Despite this disadvantage, we have a lot of key benefits for C-Corporations, particularly the liability protection for shareholders. A lot of the pros and cons are discussed in our business structures lesson, which came much more prior to this than hopefully you took a look at that. It's a very important lesson. We'll talk about some pros and cons, but between this and that lesson, you have a full comprehensive list of everything that is great and maybe not as great for C-Corporations. Now primary advantage here is, as we talked about, the liability protection. This is going to be huge because under state law, corporations are considered a separate legal entity. So if a corporation goes and has negligence or fraud or anything like that, then it's on the corporation, not on you. That being said, if you go out and commit some sort of crime, you can't say, oh,

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C Corporations

Module: 7 Concepts, 81 Videos

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