One of the first things most people give consideration to when setting up a business is its structure. What will meet their needs? Will a sole-proprietorship, a partnership, a limited liability company, or a corporation work best? If you choose incorporation, will it be a C-Corporation or an S-Corporation?
The option that you finally choose will depend, in large part, upon the answers to questions surrounding your future liability, taxation, ease of transfer of ownership, and access to capital.
There are a few similarities between an S and C-Corporation. Primarily, they both offer limited liability for the owner(s), and the owner(s) can deduct 100% of their health insurance premiums. However, there are several notable differences as shown below.
A C-Corporation can:
- be owned by non-U.S. citizens or non-residents.
- be owned by other business entities.
- have unlimited numbers of shareholders/members (useful for publicly traded companies).
- have more than one class of stock of ownership interest
- have the income of the entity taxed separately from the income of its owners
- have the tax on the entity’s income paid by the individual owner(s) and not the entity
- Must be owned by a U.S. citizen or resident alien.
- Can have no more than 75 shareholders/members.
- And, owner(s) can deduct business losses on their individual tax returns.
To find out more about which business structure might be better suited for you, read the informative article, Choose Your Business Structure (Wisely!), located at
http://www.thinkinglike.com/Essays/choosing-business-structure.html. Also visit https://www.incparadise.net for more information on incorporating a business in your state.
Frequently Asked Questions about different entities. S-Corporation filing for only $25. Incorporate new S or C Corporation in any U.S. State for only $89.
Since the ultimate decision has so much riding on it, you should also consider discussing the issue with a qualified accountant and/or tax attorney before making your final decision.« Return to all articles