Are you considering structuring your new business as a corporation? Have you considered the advantages and disadvantages between C Corporations and S Corporations? Learn more about how corporations operate to determine if a corporation is the right business structure for your new business:

What is a Corporation?

One of the most consistently dynamic business entities is the corporation. Offering tremendous flexibility and advantages that generally outweigh all other business entities, the corporation is the most secure entity in business. Because a corporation is considered a 'person' with rights of its own under the law, a stockholder (owner or partial owner) is a holder of shares of stock in the corporation and is not in legal danger for the acts of the corporation.

Corporations vary in their formation and organization. You will need to select from various types. The two typical corporations that most CPA's or attorneys will recommend are S and C corporations. In explaining the differences between S and C corporations, one should keep in mind that every state has different laws for corporations.

Comparison of C Corporations & S Corporations

C Corporation

  • Allows for limited liability of the owners/officers/directors.
  • Runs on a fiscal year, which may be designated by the board of directors, rather than on a calendar year.
  • Nevada requires no disclosure of corporate owners.
  • Profits are taxed at corporate rates on an 1120 return separate from the individual return.
  • Profits can be kept as retained earnings.

C corporations offer more protection and options for business owners in almost every case:

  • In almost every category, C corporations will pay less in tax than an individual. The C corporation tax table is the only one in which the tax rate drops when you start making millions. That's why every Fortune 500 company is a C corporation.
  • C corporations have no limitations on shareholders. Shareholders can live anywhere in the world and can be any type of entity.
  • There are far fewer criteria for a C corporation, as compared with an S corporation, so you have the options you need to meet your objectives.

S Corporation Advantages

  • Allows for limited liability of the owners/officers/directors.
  • Typically runs on a calendar year.
  • Full disclosure of corporate owners.
  • Profits pass through to the individual tax return 1040. No tax brackets separate from the personal tax brackets apply.
  • All profits are taxed even if not distributed.

There are certain qualifications that the corporation must meet in order to elect S corporation status. To elect S corporation status, your corporation must meet all of the following requirements:

  • It must be a domestic corporation formed in the U.S.A.
  • It may have no more than 75 shareholders.
  • It may only have individuals, estates or certain trusts as shareholders.
  • It may not have non-resident alien shareholders.
  • It may only have one class of stock.
  • It must be a small business corporation (financial institutions, such as banks, insurance companies, building and loan associations or mutual savings and loan associations, cannot take advantage of an S corporation election).
  • It must conform to state statutory restrictions, which limit the transfer of shares/ownership of the company.

Is a C Corporation or S Corporation the right structure for your new business?

Don't wait to take advantage of the protections the law affords you and your business. No matter what business entity you choose, it needs to be for the right reasons. Let our business formation experts help you decide which business entity is right for you by calling 1-800-508-1729.

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Why Nevada?

  • You can live and run your business in any state and still incorporate in Nevada.
  • Forming your entity involves no minimum capital requirements
  • Lawsuit proof laws - If your business does get sued, your personal assets will stay safe.
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