Module 3

Business and corporate taxation: choosing a form, taxing profits, deductions and depreciation, dividends, losses, groups and the cost of getting out

A business is taxed in different ways depending on the legal form it takes, and the form is often chosen before anyone asks what the tax will be. A sole trader is taxed as a person. A partnership is usually ignored and its partners are taxed. A company is a separate taxpayer, taxed on its own profits, and then its owners are taxed again when they take money out. Choosing a form is therefore a tax decision as well as a legal one, and the tax costs of changing it later can be large. This module explains the main forms and how each is taxed, how taxable profit is worked out, what can be deducted, how losses, dividends and groups are treated, and how to think about the cost of starting, running and changing a business.

General education on taxation law, using invented people, businesses and figures. It states common principles in simplified form and does not describe any one country’s law, which differs and changes; tax rules, rates, thresholds and deadlines are strict and local. It is not tax or legal advice. Consult a qualified adviser in the place that matters.