Whether you have a business already or are looking to start a new business, there are usually a lot of decisions that you need to make. Some of those decisions are the businesses tax and filing status.
With Selby Services, we can sit down with you and evaluate whether you should be an C Corporation or an S Corporation; whatever your decision, we can help you with your taxes!
A C Corporation is the standard status for most corporations, while an S Corporation holds special status with the IRS.
Both types of corporations share many of the same qualities:
● Limited liability protection: Owners are not held responsible for the business debts and liabilities.
● Separate entities: Both types of corporations are separate legal entities.
● Structure: Both have shareholders, directors and officers. The shareholders are the owners of the company and can elect the board of directors that oversees and directs corporation affairs and decision making. The directors, in turn, elect the officers to manage daily affairs.
● Corporate formalities: Both types of corporations must follow the same internal and external formalities and obligations.
Both types of corporations are also different in a few ways:
● Taxation: The biggest difference between C and S Corporations is the way they are taxed.
○ C Corporations: C Corporations file a corporate tax return and pay taxes at the corporate level. They also could be double taxed if the income is distributed as dividends, which are considered personal income.
○ S Corporations: S Corporations file an informational federal return, but no income tax is paid at the corporate level. The profits or losses of the business are passed through and reported on the owners’ personal tax returns. Any tax due is paid at the individual level.
● Corporate ownership: C Corporations have no restrictions on ownership, but S Corporations can have no more than 100 shareholders, and those shareholders must be U.S. citizens or residents. S Corps can’t be owned by C Corps, other S Corps, LLCs, partnerships, or trusts. C Corporations provide a little more flexibility when starting a business if you plan to expand your corporation.
Whatever your needs are as an existing or newly beginning corporation, Selby Tax & Accounting Services is here for you every step of the way! Call us today at 616-613-3222 to set up an appointment to talk about your corporation.
de a little more flexibility when starting a business if you plan to expand your corporation.