Division of TaxationA corporation, sometimes called a C corp, is a legal entity that is separate from its owners. Corporations can make a profit, be taxed, and can be held legally liable.
Corporations offer the strongest protection to its owners from personal liability, but the cost to form a corporation is higher than other structures. Corporations also require more extensive record-keeping, operational processes, and reporting.
Corporate profits are generally taxed twice when the company makes a profit. A corporation pays Income Tax by filing a CBT return and their shareholders pay tax on dividends they receive on their Individual Income Tax returns.
Corporations have a completely independent life separate from its shareholders. If a shareholder leaves the company or sells his or her shares, the C corp can continue doing business relatively undisturbed.
An S corporation, sometimes called an S corp, is a special type of corporation that is designed to avoid the double taxation drawback of regular C corps. S corps allow profits, and some losses, to be passed through directly to owners' individual income without ever being subject to Corporation Business Tax rates.
S corps must file with the IRS to get S corp status, which is separate from registering for Ó£»¨ÊÓƵ.
An S corporation can have no more than 100 allowable shareholders. All initial shareholders must agree to pay taxes to Ó£»¨ÊÓƵ in this manner (electing S corporation status) when they form an S corporation and register it in Ó£»¨ÊÓƵ. The corporation must be fully registered with the Ó£»¨ÊÓƵ Division of Revenue and Enterprise Services, and have a Certificate of Incorporation or a Certificate of authority to do business in this State. Shareholders may include individuals, estates, certain trusts, and certain exempt organizations.
S corps also have an independent life, just like C corps. If a shareholder leaves the company or sells his or her shares, the S corp can continue doing business relatively undisturbed.
A Ó£»¨ÊÓƵ hybrid corporation is a federal S corporation that has not elected to be treated as an S corporation for Ó£»¨ÊÓƵ purposes.
For Corporation Business tax purposes, the corporation files as a C corporation and calculates its Ó£»¨ÊÓƵ allocation factor to determine its net income or loss allocated to Ó£»¨ÊÓƵ.
A QSSS is a wholly owned corporate subsidiary of a federal S corporation that has elected to have the subsidiary treated as a QSSS for federal income tax purposes. A Ó£»¨ÊÓƵ S corporation election requesting to operate as a Ó£»¨ÊÓƵ QSSS must be filed.
The QSSS must file CBT 100S annually, including only page 1 reflecting zero income, the Annual Questionnaire, and when applicable Schedule PC, and remit the minimum tax. The parent company must consent to filing and remitting Ó£»¨ÊÓƵ Corporation Business Tax which would include assets, liabilities, income and expenses of its QSSS and its own.
Failure of the parent either to consent or file a CBT-100 or CBT-100s for a tax period will result in the disallowance of the Ó£»¨ÊÓƵ QSSS election and require the subsidiary to file and remit a CBT-100S determining its own liability.
Ó£»¨ÊÓƵ tax laws include provisions that exempt qualifying nonprofit organizations and government entities from paying tax.
If your organization is properly incorporated and operated as a nonprofit corporation, your organization is automatically exempt from the Ó£»¨ÊÓƵ Corporation Business Tax.
Unless the corporation's operations or activities make the taxpayer a profit making corporation, no Corporation Business Tax returns or federal returns are required to be filed with us. We do not require a copy of Federal Form 990.
For a nonprofit corporation to request a letter of exemption from the Corporation Business Tax Act, the applicant organization must submit all of the following:
The signed affidavit must indicate the corporation is:
Send the exemption letter request to: