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S Corp vs C Corp - Can we differentiate between the two? To initiate any business operation, you need to first catch the bull's eye, and secondly, you have to decide the business legal structure, which is indeed not easy, as high stakes are involved. Amidst S Corp, C Corp, LLC or any other business entity. S Corp and C Corp are the most common business entities and knowing about the difference between the two can help you in making the right decision and meeting your business needs. However, in each business structure type, the incorporation process is almost same but needs time, so the best is to make a wise decision and opt to incorporate business online. Here we will provide you brief about the C Corporation and S Corporation and the difference between the two.


Corporation Basics Before understanding the difference between C Corp and S Corp, we would look at what is common among them. Both the structure type is run by the shareholders who look after the business operations. Directors hire the team of officers who run the day to day business activities. Profits are distributed among the shareholders, according to the number of shares they hold or owns. A corporation is structured by formulating a document known as articles of incorporation and filing the necessary documents with the secretary of state. Corporations are required to issue stock, formulate by-laws, and also conduct annual director and shareholder meetings. Besides they hold minutes of the meeting and issue many corporate resolutions. In case of failure, the business can lose personal liability protection and might also face the dissolution The biggest advantage of the corporation is that it offers limited liability to its owners. In this structural setup, only the assets of the corporations are subjected to the corporate debts. And shareholder is also not personally liable for the corporate debts and assets. Though there are certain exceptions to this rule. However, there are also differences between the C Corporation and S Corporation


All corporations start as C corporations and later can be instituted as S Corporation by filing IRS Form 2553. Election by the Small Business Corporation, with the Internal Revenue Service. To get S Corp status for the year, businesses need to fill Form 2553 no later than March 15th of that year for corporations who operate during that respective calendar year. For the corporations also who are operating in an alternative fiscal year must file no later than the 15th of the third month of the fiscal year. However, you can also file at any time during the previous tax year.


The difference on Taxation rules There is a big difference in how a C Corporation and S Corporation are taxed. All profits on C Corporations are taxed, which are reported on the corporation tax returns. Any after taxes profits are distributed to shareholders as dividends which are again subjected to taxation. They are reported by the shareholders on their personal tax returns. But the corporations can avoid this "double taxation' by electing S Corp status for the corporation. An S corporation is treated on similar grounds to the sole proprietorship or a partnership. While in the State tax structure, states can pass profits through to the owners of S Corporations. Difference in ownership A C Corp offer more flexibility during the time of selling shares of stock. However, any corporation that decides to elect S Corp status have to meet certain conditions like  They cannot have more than 100 shareholders.  They cannot issue more than one class of stock.  Their shareholders should be U.S citizens or residents and others. However, these restrictions are not applicable to C Corporations. So Corporations have more opportunity to grow, for instance, more than one class of stock can help the business raise their capital without having to give voting rights. So what is better for your business depends on many factors. Generally, small business owners opt for S Corp status which falls in the legal limitations of an S corporation. While certain types of corporations feel C Corporation is best for them. An S corporation is also not suitable for large corporations as their startup capital is more. So if you have decided to either opt for S corporation or C Corporation, you can complete the necessary requirements online through the company incorporation service providers. This is legit and smart way to incorporate.

S Corp vs C Corp - Can we differentiate between the two?  

However, in each business structure type, the incorporation process is almost same but needs time, so the best is to make a wise decision an...

S Corp vs C Corp - Can we differentiate between the two?  

However, in each business structure type, the incorporation process is almost same but needs time, so the best is to make a wise decision an...

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