The main legal restriction on the distribution of profits by companies is that shareholders are only entitled to amounts proportional to their percentage. Additional legal restrictions depend on the type of distribution chosen by the company. Companies typically pay cash dividends, but they can also pay shareholders through ownership, constructive dividends, and salaries if the shareholders are also employees and officers of the company. Dividends and cash salaries are subject to income tax. Shareholders pay capital gains tax if they receive real estate in the form of dividends, but are exempt if the property is not improved. U.S. law distinguishes between corporations based on their objectives and structure. Businesses can be not-for-profit or for-profit. For-profit organizations are further classified as “C” or “S” companies depending on their structure. All companies are subject to specific legal restrictions on the distribution of profits, depending on their profits, business objectives, tax classification and type of profit sharing. Which of the following is not a legal restriction in relation to distributions of profits by a company?a. The amount distributed to owners must comply with state laws for businesses.b. The amount distributed in a year can never exceed the reported net income for that year.
Profit distributions require formal approval by the Board of Directors. Dividends must be in full compliance with share capital contracts in terms of preferences and participation. The amount distributed to owners must comply with state laws for businesses, unless the following is a legal restriction. The amount distributed can never exceed the annual profit of the year. Profit distributions must be approved by the Board of Directors. All of these restrictions are legal, with the exception of option b. Option b states that the amount distributed in 1 year can never exceed the net profit reported for that year, and this is not a restriction. They know there is no limit when it comes to everything else. The net profit for the year is reported and the amount is distributed. I hope that is correct. I hope you have a good day. Tax classification also has an impact on the distribution of profits in capital.
Federal law roughly categorizes for-profit corporations into “C” and “S” corporations; The former are subject to corporation tax, the latter are not. “C” corporations must first pay tax on all their income, excluding legally permitted deductions and tax credits, before they can distribute the balance to their shareholders, who will also be taxed on the amounts received. “S” companies can distribute all their profits and profits to shareholders, so there are fewer restrictions on the distribution of profits. Profit distribution laws generally apply to for-profit corporations and exempt not-for-profit organizations, except in certain circumstances. Non-profit organizations generally do not operate to make a profit and are prohibited from distributing profits to their directors, members, officers or even political campaigns, unless they are used to pay reasonable salaries and reimburse expenses. However, if non-profit organizations engage in other activities that are not related to their main purpose and generate significant profits, they are still not allowed to distribute them and risk losing their exemption status. Conversely, for-profit companies can withhold their profits or distribute them to shareholders. “Which of the following is equity? (A) Dividends (B) Buildings (C) Prepaid taxes (D Retained earnings ยป Undistributed earnings Companies may retain their profits and profits for investment purposes, but are immediately subject to the legal restrictions contained in the tax legislation when distributing these profits to shareholders. The Internal Revenue Service requires companies to pay taxes on their profits and profits, defined as the amount companies can pay without returning the capital invested by shareholders. Companies pay taxes on a progressive scale at a rate of 15-35% on all their profits and profits. However, companies that provide personal services are subject to a flat tax rate of 35%, which affects the amount they can distribute to shareholders. Field tests and questions curated by our Hall Harris AI tutor Hall Harris` professional career in commercial writing dates back to 2001.
He holds an MBA and a Bachelor of Commerce from Kingston University and the University of Liverpool, respectively. Hall`s articles have appeared in the Nottingham Evening Post and the International Business Times. You started your own company three years ago. You initially contributed $200,000 of your own money and in return bought 3 million shares of sto.. receive.