"C" Corporation VS "S" Corporation

Differences Between "C" Coroporations and "S" Corporations

A corporation can file for status, as an "C" or "S" corporation with the Internal Revenue Service and in some States similar filing. Each classification has unique Internal Revenue Tax liabilities to the corporation and shareholders. Also, each type of corporation has advantages and disadvantages. Employees employed by either "C" or "S" corporation, have their own unique income tax responsibilities.

A profit corporation or "C" corporation, income taxes are paid by the corporation and shareholders. A shareholder can be a foreign citizen. Any income losses remain in the "C" corporation and not incurred by any shareholder. Most large corporations, having more than seventy-five shareholders prefer "C" corporation filing. These companies expect to distribute dividends and any accumulation of capital gains to shareholders. Owners of a "C" corporation are not liable for any debts of the business, in case of bankruptcy. Main disadvantage for a "C" corporation: Income taxes are paid twice, when the corporation earns a profit, and when shareholders receive income distribution, from dividends and capital gains. Also, any corporate loss, may not be passed through to shareholders, which to claim, against any taxable income.