According to Investopedia.com, a corporation is a “legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. The most important aspect of a corporation is limited liability.” This means that “shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company’s debts.”
Because corporations hold a special place within the United States economical system, they get their own unique tax return. Form 1120, or the U.S. Corporation Income Tax Return, is reserved particularly for corporations to report their income, gains, losses, deductions, credits, and to calculate their overall annual income tax liability.
Need a step by step guide for completing Form 1120? This video will help:
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