BUSINESS CORPORATE FINANCING

Articles In This Section:

· Form of business and financing

· BUSINESS ADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS DISADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS FINANCING

· WHAT TYPES OF BUSINESS LOANS

· LOANS FOR THE BUSINESS

· A LINE OF CREDIT FOR THE BUSINESS

· How a Sole Proprietorship is Taxed

· BUSINESS ADVANTAGES OF THE PARTNERSHIP FORM

· BUSINESS DISADVANTAGES OF THE PARTNERSHIP FORM

· THREE RULES AS BUSINESS PARTNERS

· BUSINESS TAXATION

· BUSINESS CORPORATION

· BUSINESS DISADVANTAGES OF THE CORPORATE FORM

· BUSINESS CORPORATE FINANCING

· BUSINESS STOCKHOLDER ELECTION TO REPORT CORPORATE INCOME

· MAKING THE BUSINESS ELECTION

· HOW THE BUSINESS ELECTION IS LOST

· BUSINESS ADVANTAGES AND DISADVANTAGES OF STOCKHOLDER REPORTING OFCORPORATE INCOME

Corporate financing is a complex problem. Advice should be obtained from attorneys, accountants and bankers. The problem is especially obvious because of the many diverse ways to finance. There are over a dozen major different types of stock a corporation can issue. Each type, in turn, is subject to variation.

Taxation. A corporation income tax is payable each taxable year on the taxable income of every corporation. The tax consists of a normal tax and a surtax. The normal tax is 30% of taxable income. The surtax is 22% on the amount of taxable income that exceeds $25,000.

Corporate taxation is complex. Competent legal and accounting advice must be obtained. However, the prospective incor-porator should be aware of certain pitfalls relating to corporate taxation.

For example, in operating a family corporation, beware of becoming a personal holding company. The evil associated with this classification is the arbitrary high surtax rate (75% to 85% ). Your motives and intentions are immaterial, once you fall within this classification. Be sure to obtain legal advice if you are contemplating incorporation in a family situation.

An additional warning to you as a prospective incorporator is the tax on accumulated earnings. This special tax is imposed on corporations when surplus is accumulated for the purpose of helping stockholders avoid the payment of a tax on dividends. The penalty tax is intended by the government to force a distribution of corporate earnings.