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Difference between C Corp and S Corp

Difference between C Corp and S Corp

There are many different types of business structures a business can choose from. Two of the most popular structures are the C Corp and S Corp. Both have their own benefits and drawbacks, so how do you know which one is right for your business? In this blog post, we will break down the difference between C Corps and S Corps, so you can make an informed decision about which structure is best for your company.

What is C Corp?

A C Corporation is a type of business structure in the United States that provides limited liability for its shareholders. C Corporations are also taxed separately from their owners, meaning that the profits and losses of the business are not passed on to the shareholders. This type of structure is typically used by larger businesses, as it can be more complex and expensive to maintain than other types of business structures.

C Corporations can also have unlimited shareholders, making them a good option for businesses that are looking to raise capital through investment. If you’re thinking about starting a C Corporation, it’s important to consult with an experienced business attorney to ensure that you understand all of the implications of this type of business structure.

What is S Corp?

S corporation is a unique type of business entity that offers its shareholders special tax treatment. S corporations are taxed as pass-through entities, meaning that the business itself is not subject to corporate income tax. Instead, the business’s income is “passed through” to the shareholders and taxed at the individual level. This can provide significant tax advantages, particularly for small businesses. S corporations are also restricted in terms of who can own them; they can only be owned by U.S. citizens or resident aliens. In addition, S corporations cannot have more than 100 shareholders. If you’re thinking of starting an S corporation, it’s important to consult with a professional to ensure that you meet all of the requirements.

Difference between C Corp and S Corp

C corporations and S corporations are two different types of business entities regulated by the IRS. C corps are the most common type of corporation and are taxed as separate entities from their owners. This means that C corp shareholders must pay corporate income tax on any profits earned by the company. In contrast, S corps are not taxed as separate entities from their owners.

Instead, all profits and losses are “passed through” to the shareholders, who then report them on their personal tax returns. This can result in a lower overall tax burden for S corps. However, S corps are subject to additional regulations, such as restrictions on shareholder eligibility and the number of shareholders. As a result, C corps may be a better choice for businesses that plan to go public or raise capital from outside investors.

Conclusion

The key difference between a C Corp and an S corp is that a C corp is taxed on its income, while an S corp is not. This makes the C corp structure more advantageous for businesses with large profits. There are other benefits to forming a C corp, such as limited liability and easier access to capital, so it can be a good choice for certain businesses.

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