Distribution of Corporation Income - Income from a corporation is generally
distributed in five ways.
distributed in five ways.
- Payment of business expenses. Deductible business expenses include
any wages, salaries, bonuses, business related travel expense, and other
compensation paid to employees or independent contractors that render
services for the corporation - Payment of debts - Paying off the principle is not deductible, but almost all
interest expenses associated with a loan or deductible. - Purchase of Assets - When a corporation buys an asset for the benefit of
the company, it is generally not a taxable event. - Loans - When a company lends money, it is generally not a taxable event.
However, interest received will generally be income to the company. - Payment of Dividends - The Corporation, upon approval by the Board of
Directors, may pay a dividend to its share holders out of profits. Most
dividends are paid out of after-tax corporate funds received by the recipients
are usually taxable.
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