S Corp vs. C Corp: Which One’s Better for You?

 A multitude of corporations exists that include LLCs, C Corps, and S Corps. Each of these comes with individual pros and cons. S Corps and C Corps are considered the same. However, they hold many differences.

Essentially, almost every new corporation is a C Corp as it’s considered the standard corporation under the IRS. In this article, we focus on what C Corps and S Corps are and guide you about which one works the best for your business. 

The Basics of C Corp and S Corp

The difference between the two corporations lies mainly in the IRS code they’re subjected to. C Corporations are taxed under subchapter C and S Corporations are taxed under subchapter S.

The two are almost identical when it comes to their limited liability feature; the members of the corporations aren’t liable personally for any of the losses incurred by the business. They’re both considered separate legal entities; therefore, all transactions are done using the corporations’ names.

Along with this, the filing documents and structure of the two are almost similar as well. While they hold many similarities, the two hold significant differences as well.  

The Difference in Taxation

When it comes to the taxation of C Corporations, these are taxed separately and hold a corporate level for taxation. This means that there’s a high chance for C Corps to undergo double taxation.

On the other hand, S Corps are not required to file an income tax return. This eliminates the possibility of double taxation. That’s because the profits and losses of the business are passed through to the owners. The personal tax returns of the owners cover the profits and losses from the S Corp; therefore, S Corps are considered to be advantageous in terms of taxation.

The Difference in Flexibility

When it comes to flexibility and scalability, S Corp is limited to a maximum number of 100 shareholders. On the other hand, C Corps don’t have any such limitations present. Therefore, if you plan on running a corporation on a smaller scale, S Corps happen to be the more popular option.

 

When it comes to which one works best for you, it’s important to consider the scale of your business. Many times, small businesses prefer incorporation services for an S Corp because of the tax advantage and their business’s scope.

If you’re looking for company incorporation services, look no further. Corporations4Less can help you with incorporating your business as a C or S Corp. It also offers shelf corporations and credit repair services in Pennsylvania, Florida, and California.  Connect today for expert consultations.