CFP

Characteristics and Income Taxation of Business Entities - Distributions

Distributions
The proper distribution of income, dividends and capital gains will vary depending on the way the entity is setup. Tax rates will also vary at the individual and corporate levels.  

Sole proprietorships, partnerships & limited liability partnerships
Distributions of income and capital gains/losses will "flow through" to the individual or partners. Schedule C for sole proprietorships and Schedule K-1 for partnerships all treated as self-employment income.


S-corporations
Distributions of income and capital gains/losses will "flow through" to the individual or partners, treated as W-2 income and ordinary income.

C-corporations
Distributions of interest, dividends and capital gains/losses will be distributed to the shareholders per the authorization of the board of directors. Submitted via Form 1099INT, 1099DIV and 1099B.

Limited liability companies
These can be set up as sole proprietorships, partnerships, S-corporations and C-corporations; as such they will follow the same distribution rules as each of those corresponding entities.



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