C Corporations And S Corporations

If you are forming a corporation in the U.S., you have to make choices as to the tax structure of your corporation. Most businesses that incorporate are either C corporations (C-corps) or S corporations (S-corps). Other common business entities include partnerships and limited liability companies (LLCs).

What Is The Difference Between A C-Corp And An S-Corp?

The key differences between C-corps and S-corps lie in the manner in which they are taxed. Profits earned by a C-corp is taxed twice — once on the corporate level, and again by shareholders on their net dividends.

S-corps feature flow-through taxation, in which profits "flow through" the corporate level to the level of individual shareholders, where they are taxed once.

Generally, small businesses are better served by forming an S-corp, but there may be factors that make a C-corp a more attractive option. Not every corporation can become an S-corp. An S-corp can have no more than 100 shareholders, who must be U.S. citizens or resident aliens, and must only have one class of stock. S-corps are also subject to strict accounting rules.

Before making any decisions on business entity, it is important to get good advice from a knowledgeable attorney. I have helped many clients establish corporations in California and other jurisdictions, and can help you explore all of the options available to you.

Talk To A Lawyer About Business Entity Selection

I can guide you through all of the steps of business incorporation in California. Contact my law office today online or by telephone at 714-955-4976 to arrange a free initial consultation. I handle a broad range of business law and corporate formation matters for clients in Orange County and throughout Southern California.