Loophole Inc.

A business glossary

In Florida, a business can legally avoid the state's corporate income tax simply by the way it is organized. An estimated 240,000 corporations - often called C corporations - are required to file corporate income tax returns. Almost all other businesses are exempt because of their structure and because the state does not have a personal income tax.

C corporation: A business with an unlimited number of shareholders that is generally taxed twice - at the corporate level and at the shareholder level.

S corporation: A business with up to 75 shareholders that is generally taxed only once - on its owners' personal income tax returns. Because Florida doesn't have a personal income tax, owners pay only the federal tax.

Partnership: An unincorporated business that two or more people own. Typically it bypasses the state corporate tax.

Limited liability company: A type of business often used by lawyers and other professionals. This structure provides protection from lawsuits, just like C corporations; but unlike C corporations, an LLC is taxed only once - on its owners' personal tax returns.

Trust: An entity created by a person who contributes assets to it and appoints one or more trustees to manage all or part of it. Trusts may or may not be subject to tax, and testamentary trusts, which are created by the death of owners, are specifically exempted from Florida's corporate tax.

Nonprofit corporation: An entity usually formed for the purpose of serving a public benefit other than making money for owners. To become tax exempt, the IRS must recognize it as organized for religious, charitable, scientific, educational or literary purposes.

Foundation: An entity established as a nonprofit corporation or a charitable trust, with a principal purpose of making grants to unrelated organizations or institutions or to individuals for scientific, educational, cultural, religious or other charitable purpose. Foundations pay a small tax on investment income but generally are exempt from corporate income tax.

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