Bylaws are the rules of a corporation that will be performed throughout the organization’s existence. The following bylaws should be factored into a C-corp’s structure.
- Keep your accounting records and financial statements up-to-date. An accurate balance sheet and income statement helps to make preparing your C corporation tax return extremely easy every year and will ensure that you don’t run the risk of reporting too much (or too little) income. If your business grows big enough, you’ll be required to report your balance sheet on Schedule L of your C corporation’s tax return.
- Record your income. The first section of Form 1120 is where your business’s income and cost of goods sold are recorded.
- Record your expenses. The second section of Form 1120 is where your business’s expenses are recorded.
- Calculate your net profit or loss. Subtract your total expenses from your gross income to compute your net profit or loss. On a C corporation tax return, the technical name for your business’s profit or loss is “taxable income (or loss)”.
- Calculate taxes owed and payments made. Calculate your C corporation’s tax liability according to the Form 1120 instructions. Also, record any payments made during the tax year along with any tax credits.
- Determine balance owed or overpayment. The final dollar amount on Page 1 of your Form 1120 will tell you either how much money you still owe the U.S. Treasury or how much money you overpaid to the U.S. Treasury.
- Complete Schedule C. This schedule calculates any dividends that will be distributed to shareholders, along with various special deductions.
- Complete Schedule J. This schedule is where you will compute the tax liability of your C corporation.
- Complete Schedule K. This schedule contains miscellaneous questions and information about your C corporation.
- Complete Schedule L. If required, complete Schedule L. This is where you would report your business’s balance sheet.
- Complete Schedule M-1. This schedule is where you reconcile taxable vs. non-taxable income and deductible vs. non-deductible expenses.
- Complete Schedule M-2. This schedule is a more detailed look at the C corporation’s retained earnings.
Understanding the tax history of C corporations will help you understand why this entity has lost its popularity over the years, and how you can benefit from forming a C corp business today.