Why Form 1120 C Dividends 2023-2024

Hi, my name is Jason Watt and welcome back to the Business Career College video series. In this particular video, we're going to look at dividends paid from a small business. This video will work nicely with a few other videos; you might find the video on investment income useful, especially the dividend portion. This is going to be part of a series of videos concerning shareholder compensation overall, and you might also find this useful as part of a series of videos concerning taxation within a corporation. So we're gonna build a little corporation here, and then we're going to go through how it earns revenues and what those revenues mean when they're paid out to a shareholder. As always, this is intended as general advice. If you need specific tax advice, you'll need to consult with an appropriate professional. These videos are intended as general information only. So let's just work with an operating company for now. This operating company, again we'll keep it easy, has one shareholder, Karla, who owns 100% of the company. Karla's shares, not that it really matters, let's give them an EBC at zero. They were purchased or acquired by Karla at the start of the company. Today, the company has revenues of $1,900,000 and expenses of $1,200,000. If Karla had a salary, it would be considered an expense as well. For now, let's assume there is no salary. So the company's taxable income would be $700,000. With a small business, the first $500,000 of taxable income is taxed at the small business rate, which is approximately 15%. Anything over $500,000 is taxed at the corporate general rate, which is approximately 25%. So, in total, the tax payable would be $125,000. So, at the small business rate, Karla's corporation, OpCo, earned $500,000 and paid...