Business Entity Types

In order to understand business taxes and how they apply to your business or corporation it is important that you understand business entity types.


C-CORPORATION

A C-Corporation is a standard business corporation. C-Corporation earnings are taxed at the corporate level, and dividend income to the shareholders is taxed at the personal income tax level.

C-Corporations file Form CO-411, Corporate Income Tax Return in Vermont. Corporations that are part of an affiliated group conducting unitary business are required to report on a combined basis.

(For tax years starting in 2014, affiliated groups file Form CO-411.  (For tax years 2008 – 2013, they should file Form CO-411-U, Combined Report for Unitary Group). Vermont filing requirements and due dates generally coincide with federal filing requirements.

C-Corporations pay tax on income attributed to Vermont, and are subject to a minimum tax based on Vermont Gross Receipts.

A C-Corporation must register with the Vermont Secretary of State and obtain a certification of authority to do business in this state.


S-CORPORATION

An S-Corporation is a corporation taxed under subchapter S of the Internal Revenue Code. The profit or loss of an S-Corporation normally passes to the shareholders who report the profit or loss on their individual income tax returns with both the IRS and Vermont.   S-Corporations file Form BI-471, Business Income Tax Return with Vermont. Filing requirements generally coincide with federal filing requirements.

S-Corporations generally do not pay income taxes at the entity level, but are required to pay a minimum tax of $250 per tax year.

In addition, if any of the shareholders are residents of a state other than Vermont, the corporation is required to make quarterly estimated payments on behalf of non-VT-resident shareholders. 

S Corporations may elect to file a composite return which means it pays tax for the non-VT-residents at the entity level, and relieves the shareholders of their requirement to file a Vermont income tax return, provided there is no other activity or income in Vermont.  S Corporations with more than 50 non-VT-resident shareholders are mandated to file composite returns.

An S-Corporation must register with the Vermont Secretary of State and obtain a certification of authority to do business in this state.


LIMITED LIABILITY COMPANY

The Limited Liability Company (LLC) contains certain elements of both a corporation and a partnership. Under federal “check the box” regulations, LLCs may elect to be taxed as partnerships, C-Corporations, or S-Corporations. The election made at the federal level is binding for Vermont. Most LLCs are taxed as partnerships, and file Form BI-471, Business Income Tax Return in Vermont. LLCs that choose to be taxed as C-Corporations would file Form CO-411, Corporate Income Tax Return . Filing requirements generally coincide with federal filing requirements.

For details on Vermont filing requirements, refer to the section for the tax treatment the LLC has chosen with the IRS.

Single member LLCs, those owned 100% by a single entity or individual may elect to be disregarded for income tax purposes, with all activity being reported on the income tax return (individual or corporate) of its one owner. This election is made at the federal level, and treatment in Vermont will conform to this election. A single member LLC that is eligible and has elected to be treated as disregarded for federal tax purposes is not required to file an income tax return in Vermont. The owner of the LLC is required to file.

An LLC must register with the Vermont Secretary of State and obtain a certification of authority to do business in this state.


PARTNERSHIP

A Partnership is a form of business ownership where two or more owners agree to invest resources for the business activity and to share in the profits or losses of the business. A partnership is generally treated as a pass-through entity with the partners reporting the business profit or loss on their personal income tax returns. General partners are held personally responsible for the partnership’s liabilities.

Partnerships file Form BI-471, Business Income Tax Return with Vermont. Filing requirements generally coincide with federal filing requirements.

Partnerships generally do not pay income taxes at the entity level, but are required to pay a minimum tax of $250 per tax year.

In addition, if any of the partners are residents of a state other than Vermont, the partnership is required to make quarterly estimated payments on behalf of non-VT-resident partners. 

Partnerships may elect to file a composite return which means it pays tax for the non-VT-residents at the entity level, and relieves the partners of their requirement to file a Vermont income tax return, provided there is no other activity or income in Vermont.  Partnerships with more than 50 non-VT-resident partners are mandated to file composite returns.

If the Partnership operates under a trade name, the trade name must be registered with the Vermont Secretary of State.


SOLE PROPRIETOR

A sole proprietor is an individual who owns an unincorporated business by himself or herself.  Sole proprietors file annual returns and pay estimated taxes quarterly at the individual level.

If a Sole Proprietor operates under a trade name, the trade name must be registered with the Vermont Secretary of State.

Contact Us

Commissioner Kaj Samsom
133 State Street | Montpelier, VT 05633
(802) 828-2505

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