07.23.07
A Closer Look at a C and S Corporation Designation
If you are interested in structuring your business as a corporation, one thing the IRS is going to want you to decide is if you want to be structured as a C or S Corporation for tax purposes. So, what are the primary advantages and disadvantages?
C Corporation
The advantages:
- viewed as a separate entity from the owners which means limited owner liability.
- can raise capital through the sale of stocks and bonds.
- ownership easily transferred.
Primary disadvantage: double taxed - once in the corporation’s checking account and once after the employees get paid.
S Corporation
The primary advantage: provides the asset protection of a standard corporation with the taxation advantage of a flow-through entity (taxed like personal income instead of as a separate entity).
Primary disadantage: very strict regulations dictating the number and type of shareholders in the business, the amount stock that is issued, and the corporation’s sources of revenue.
Consult with a qualified accountant or tax professional to determine which designation is right for you.
