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The Difference Between a C-Corporation and S-Corporation
DETERMINE WHICH ENTITY TYPE BEST FITS YOUR BUSINESS WHEN INCORPORATING
C-Corporation
Taxed On Business and Personal Level
C-Corps are taxed as a business then shareholders are taxed on any profit they receive through dividends.
Option To Go Public and Issue Shares
C-Corps have the most freedom in terms of issuing shares to investors and in choosing to be publicly traded.
S-Corporation
Allows Pass-Through Taxation
S-Corps have a tax designation that allows all taxes to be passed through to the shareholders.
Ownership and Stock Restrictions
S-Corps can’t be publicly traded. They are also are limited in the type of stock they can issue and who can own an S-Corp.
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Types of Business Entities
FIND THE ENTITY THAT IS RIGHT FOR YOU
We Can Help You Form Your Corporation
Business Type | Features | Protections & Taxes | Negatives |
|---|---|---|---|
LLC | Allows the most flexibility in terms of management and structure Can have unlimited members Can be owned by another LLC, corporation, or any other legal entity | Protects personal assets and liability from lawsuits Offers pass through taxation for business owners Requires separate tax filings | Will require regular fees and forms to maintain Can’t go public Not recognized internationally |
S-Corp | Allows for issue of shares Shareholders must be US residents Owners only get common stock | Protects personal assets and liability from lawsuits Offers pass through taxation for business owners Requires separate tax filings | Will require regular fees and forms to maintain Requires a firm structure, with a board of directors Must keep records and hold annual meetings |
C-Corp | Allows for issue of shares Owners can get preferred stock Best option to eventually go public | Protects personal assets and liability from lawsuits Taxed at the corporate level and at the personal level Requires separate tax filings | Will require regular fees and forms to maintain Requires a firm structure, with a board of directors Must keep records and hold annual meetings |
Sole Proprietorship | Doesn’t require any setup or fees Can only have one owner May still require licenses or forms, depending on state regulations | There is no personal liability protection Only taxed on a personal level Can complete taxes without a separate filing | No limited liability protection No company structure or organizing documents Limited business rights |
Features
Allows the most flexibility in terms of management and structure
Can have unlimited members
Can be owned by another LLC, corporation, or any other legal entity
Protections & Taxes
Protects personal assets and liability from lawsuits
Offers pass through taxation for business owners
Requires separate tax filings
Negatives
Will require regular fees and forms to maintain
Can’t go public
Not recognized internationally
Features
Allows for issue of shares
Shareholders must be US residents
Owners only get common stock
Protections & Taxes
Protects personal assets and liability from lawsuits
Offers pass through taxation for business owners
Requires separate tax filings
Negatives
Will require regular fees and forms to maintain
Requires a firm structure, with a board of directors
Must keep records and hold annual meetings
Features
Allows for issue of shares
Owners can get preferred stock
Best option to eventually go public
Protections & Taxes
Protects personal assets and liability from lawsuits
Taxed at the corporate level and at the personal level
Requires separate tax filings
Negatives
Will require regular fees and forms to maintain
Requires a firm structure, with a board of directors
Must keep records and hold annual meetings
Features
Doesn’t require any setup or fees
Can only have one owner
May still require licenses or forms, depending on state regulations
Protections & Taxes
There is no personal liability protection
Only taxed on a personal level
Can complete taxes without a separate filing
Negatives
No limited liability protection
No company structure or organizing documents
Limited business rights
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Frequently Asked Questions
If you have more questions regarding corporations, reads through these FAQs. To speak to an attorney about any further questions or to get started on incorporating, fill in your information and we will contact you as soon as we can.
A Corporation is a business entity, like an LLC, but with a different structure and growth options for larger companies. Standard Corporations are also known as C-Corporations, and are taxed on the business level as well as on the personal level. The preferred entity for investors, Corporations can issue shares and have the option to be publicly traded.
An S-Corporation is a Corporation that opts for an S-Election, meaning that the business will not be taxed and profits will be passed through to the shareholders. S-Corporations operate like a C-Corporation but can’t be owned by other Corporations, LLCs, or trusts. Another important note is that S-Corporations also has restrictions when it comes to issuing stock.
Corporations can operate any way the shareholders. Ultimately the shareholders choose a board of directors who then choose corporate officers. From there, the Corporation would act as any business would, but with greater freedom in raising funding and distributing shares.
The benefit of a Corporation is the growth potential which comes forth in multiple ways. Corporations are the preferred business type for investors and Corporations have the option to be publicly traded. Corporations also have the benefit of a set structure, with a clear set of rules and standards for the board of directors and corporate officers.
