Advantages Disadvantages Maryland Corporation

Advantages Disadvantages Maryland Corporation - A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders.

The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages Disadvantages Maryland Corporation

Advantages of a Corporation

Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

Advantages Disadvantages Maryland Corporation

Disadvantages of a Corporation

The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations

Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon
Form 4625 Depreciation

Advantages Disadvantages Maryland Corporation

Maryland's 2009 Business Tax Climate Ranks 45th

Maryland ranks 45th in the nation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Delaware (10th), Pennsylvania (28th), West Virginia (36th) and Virginia (15th).

Maryland's Individual Income Tax System

Maryland's personal income tax system consists of eight separate brackets with a top rate of 6.25%, kicking in at an income level of $1,000,000. Among states levying an individual income tax, Maryland's top rate ranks 20th highest nationally. Maryland's 2006 individual income tax collections were $1,762 per person, which ranked 2nd highest nationally.

Maryland's Corporate Income Tax System

Maryland's corporate tax structure consists of a flat rate of 8.25% on all corporate income. Among states levying corporate income taxes, Maryland's rate ranks 15th highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $139 per capita, which ranked the state 30th highest nationally.

Maryland Levies Sales Tax at National Median

Maryland levies a 6% general sales or use tax on consumers, at the national median. State and local governments combined collected approximately $605 per capita in sales taxes in 2006, which ranks 43rd highest nationally. Maryland's gasoline tax stands at 23.5 cents per gallon, which ranks 26th highest nationally. Maryland's cigarette tax stands at $2.00 per pack of twenty, ranking 9th highest nationally. The sales tax was adopted in 1947, the gasoline tax in 1922 and the cigarette tax in 1958.

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