There are so many different ways to establish your business, but which one is right for you? Which one will benefit your company? It can get a bit confusing. I am here to tell you that you are not alone. Today, I will be explaining the difference and similarities between the two that most clients seem to be confused about, S-Corp and C-Corp.
Let us first start with the structure, they both share the same structure for legal purposes:
The structure shows all the positions that must be established in a Corporation:
- Corporation is a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.
- President is a leader of an organization, company, community, club, trade union, university or other group. In many organizations, it is the legally recognized highest “titled” corporate officer, ranking above the various Vice Presidents
- CEO also known as the chief executive officer, the highest-ranking person in a company or other institution, ultimately responsible for making managerial decisions.
- CFO/Treasurer a chief financial officer, a senior executive with responsibility for the financial affairs of a corporation or other institution.
- Secretary is responsible for the efficient administration of a company, particularly with regard to ensuring compliance with statutory and regulatory requirements and for ensuring that decisions of the board of directors are implemented.
What is a C-Corp?
C – Corporation is an entity independently recognized because the shareholders cannot be held liable for debt or lawsuits. Taxed twice, the entity is taxed and the shareholders. C-Corps gets health coverage tax-free while an S-Corp must report it. Unlike S-corp, C-Corp allows you to have over 100 shareholders.
What is an S-Corp?
S Corp does not pay any federal income taxes. All losses and deductions are divided among the shareholders. To apply an S-corp you must have 100 shareholders or less, you must also file a business tax return with the IRS. S-Corps are not taxed at a corporate level. In an S corp the shareholders are responsible for reporting the health benefits as income.
Every single corporation starts off as a C corp, once you have established the business you can apply to the IRS for S corp status.
Now, we know that the difference between them is taxation. Still confused? What would be the best choice? Well, C-Corp you can have 1 – 1000s of shareholders, that would most likely mean that you have a large corporation and that you may want to consider that C-Corp is for you. S-Corp has a cut off of 100 shareholders, it’s a bit smaller so it would mostly likely be beneficial for smaller businesses.
This is a guest post from Sarath Cp. Sarath Cp is an Internet Marketing Consultant forIncParadise and Startupr. He loves everything about on-line marketing, sees it as an industry with a promising future and is looking forward to being a part of it in his rest of life. Join him on Twitter