How do you avoid double-taxation on income when you establish corporation in Texas?

ladyblues80: How do you avoid double-taxation on income when you establish corporation in Texas?
When you establish your business as a corporation in Texas (no state income tax, but there is a franchise tax), what is the best way to distribute earnings to pay the lowest amount of taxes and avoid double-taxation? Should I pay myself a salary, or just pay myself in dividends? I’m not incorporated yet, so I still have the option to form as a LLC.

Answers and Views:

Answer by PrissyPanda
The optimal way to distribute earnings from a TX corporation is to pay yourself a salary. With proper planning during December (or whatever month is your year end), your CPA can estimate your net income from the corporation and then determine if you need to pay yourself a bonus to lower the corporate earnings in order to reduce franchise taxes.

With an LLC you won’t have this option, and LLCs are subject to TX franchise tax. 🙂 PrissyPanda, CPA Dallas