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4 November 2023

S corp Vs C crop | Difference | Comparison

You are in the perfect if you are debating whether to incorporate your company as a  C corp or S corp. An  S corp may be preferable for small businesses, even though a C crop would be ideal if you plan on going public eventually. Every kind of corporation has advantages and disadvantages of its own, as well as taxes that differ. In order to help you choose which is ideal for your company, this article examines the difference between a C and S corp. 

What is C Corp?

The standard corporate tax structure is one that uses C corporations. C corporations are subject to double taxation, which entails paying individual income taxes on dividends and capital gains in addition to corporate income tax. They exceed the majority of S businesses and impose fewer limitations on stockholders.

What is S corp?

One more form of business structure is a S corp. The IRS codes section S has a variety of corporations. In addition to having limited liability and being exempt from double taxation, this legal entity transmits deductions, losses, income, and credits through shareholders for federal tax purposes. Although a S corp has more limitations, it also offers some safeguards not available to C corporations.

S corp Vs C crop | Difference between S corp and C corp 

  • S corp is elected by filing IRS form 2553, Whereas C corp default type of corporation.
  • S corp is personal income tax on profits. On the other hand C corp corporate tax plus personal income tax on dividends.
  • S Corp is harder to raise venture capital, but C Corp is better for raising venture capital.
  • S corp shareholders must be US citizens or residents, whereas C corp is US-based and foreign shareholders.
  • S corp is 100 or fewer shareholders, one class of stock, but the C corp unlimited shareholders, multiple classes of stock.
  • Both S Corp and C Corp have a limited liability to the amount invested.
  • S corporations cannot be owned by C corporations, or other S corporations (with some exceptions). LLCs, partnerships, or many trusts.
  • S corp can have only one class of stock, but C corp can have multiple classes.
  • The disadvantages of S corp are it is limited to passive income, Must qualify, and Must file a corporation tax return. The disadvantages of  C Corp are it is less flexible, has Higher taxes, and must do annual minutes.
  •  Both S corp and C corp, Board annual minutes Shareholder annual report(fee typically $100).
Thanks for reading the article. Still, if you have any questions or queries in your mind on the S Corp Vs C Corp then please ask us in the comment section below.

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