Incorporating a Small Business: S corporations versus C corporations

If you've been considering incorporating your small business, you've probably been confused about the difference between S and C corporations.

The similarities between S and C corporations are as follows:

1. Both S and C corporations are both separate legal entities that offer limited liability protection. If, for example, the corporation is sued only the corporation's assets are at risk. The assets of the board members or CEO are usually safe.

2. An S Corporation is essentially a C Corporation that has a special tax status with the IRS, created by filing form 2553. The articles of incorporation that are filed with the state are same.

3. Both entities must hold annual shareholder's meetings. Meeting minutes must be kept with the corporate records. Failure to follow this procedure can result in a judge's decision to 'pierce the corporate veil' and hold the corporation's owners personally liable for any penalties or debts.

So what are the differences?

1. S and C Corporations differ greatly with regards to taxation. With S corporations any income or loss generated by the business appears on the personal tax return of the owners. This is often referred to as a "pass-through" tax entity.

2. C corporations are often referred to as separately taxable entities. As you've probably already guessed, any gains or losses do not appear on the owner's personal tax records

By now you're probably thinking, "What's the use of an S corporation if my tax statements aren't kept separate?"

The reason is this: Dividends paid to the small business owners from corporate profits may be taxed twice. The IRS can tax both the corporation and the owner.

3. S and C corporations also differ with regards to ownership limitations, some of which are as follows:

a. C Corporations can have an unlimited number of shareholders while S Corporations are restricted to no more than 100 shareholders. As a small business owner this shouldn't be much of a problem.

b. S corporations cannot have shareholders that reside outside of the United States. Practically anyone can own shares of a C corporation, regardless of where they reside.

c. Also, S Corporations ownership is largely restricted to individuals. C Corporations, other S Corporations, LLCs, partnerships and many trusts cannot own shares of an S corporation. C corporations can sell shares to individual or other legal entities.

Well there you have it. Basically S corporations offer the same liability protection without the tax separation or freedom of ownership. The restrictions placed on S corporations are hardly noticed by the bulk of small businesses with only a few owners. If you're still not sure what type of corporation to form, there's a lot more information about incorporating a small business at small-business-assistance.com

Jacob Wren operates small business assistance - a resource site for entrepreneurs that offers advice on small business assistance and an array of other small business topics.

bmw rental chicago Westchester .. Lockport Chicago limo O’Hare
In The News:

Kurt “CyberGuy" Knutsson talks about a soft, vine-like robot called SPROUT that aids safe survivor rescues in collapsed buildings.
Health insurance giant Blue Shield of California confirmed it had been sharing private health data of 4.7 million users with Google for three years without even realizing it.
Delta and JetZero’s blended wing body aircraft marks a meaningful step toward a cleaner, quieter and more efficient future for air travel.
Recent reports show many common passwords can be cracked in literally seconds. Kurt the CyberGuy explains how to strengthen your passwords.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Iron, a robot that stands 5 feet, 8 inches tall and weighs 154 pounds, combines advanced artificial intelligence with human-like movement and exceptional vision.
Hertz, the rental car giant, recently confirmed that customer information was exposed through a cyberattack on one of its software vendors.
There are a number of features with AirPods you may or may not know about to take your listening experience to the next level. Kurt the CyberGuy explains.
These 35 Chrome extensions have privacy and security concerns. Tech expert Kurt “CyberGuy" Knutsson says to delete them now.
Tech expert Kurt “CyberGuy" Knutsson says 329,000 mph fusion rocket promises to be fast, disruptive and enable deep-space missions.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Tech expert Kurt “CyberGuy" Knutsson says a new autonomous AI is a game changer that also raises privacy risks. Is your data safe?
Tech expert Kurt “CyberGuy" Knutsson says robots and drones are revolutionizing fruit farming with faster picking and smarter handling.
Landmark Admin revises May 2024 cyberattack scope to show twice as many people were affected. Kurt “CyberGuy" Knutsson gives tips to help stay safe from an insurance data breach.
Tech expert Kurt “CyberGuy" Knutsson talks about how Yamaha’s hydrogen outboard motor could revolutionize boating with zero emissions.
Tech expert Kurt “CyberGuy" Knutsson reveals how to memorialize or remove a deceased loved one’s Facebook account and protect their digital legacy from misuse or scams.
Tech expert Kurt “CyberGuy" Knutsson says an Apple Watch saved psychiatrist Amanda Faulkner by detecting deadly leukemia early.
Scammers and fraudsters are increasingly targeting the most vulnerable, especially nursing homes and the personal data of their residents. Kurt the CyberGuy has safety tips.
Infected USB flash drives can spread malware among multiple organizations in ways that can easily bypass traditional security systems.
With a fully automated warehouse system and AI-powered robots, Ocado's Hive picks, packs and delivers grocery store orders in just a few minutes.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Recycling robots are using artificial intelligence to learn how to sort recyclables by recognizing patterns in colors, textures, shapes and logos.
The Reachy 2 robot is designed to be friendly and approachable, inviting natural interaction and is perfect for research, education and experimenting with embodied AI.
Kurt "CyberGuy" Knutsson shares several easy ways to keep your credit cards safe from digital thieves while you're traveling this summer.
Arcturus sets up cameras around the edges of baseball stadiums to capture real-time action and generate a 3D digital clone of the game.

Bad Regulators Cost Small Businesses

When a regulator finds a target to go after to... Read More

How to let go of your EGO

When does your ego get in the way?Let's go back... Read More

Does Your Company Have a Business Image Manual

Every business regardless of size needs a "Business Image Manual"... Read More

Top 10 Mistakes to Avoid When Joining a Professional Association

I'll be the first to admit that I went a... Read More

How the Humble Ice Cube Made Business History

Gather round while I tell you the story of Kennebec... Read More

Common Sources of Financing for Small Business

The choice of financing is an important determinant of whether... Read More

Tracking Revenue For MORE Profits

The revenue history is a vital piece of your power... Read More

Job Costing - Do You Know How?

What's your job profitability? I meet with business owners every... Read More

Presentations and Sales Automotive Detailers

Many auto detailers fall short in their sales presentations. I... Read More

Boston Market; Mobile Auto Detailing

Boston itself covers 50 square miles of concrete and traffic,... Read More

How to Wash Mobile Homes as a Business

Washing manufactured homes, mobile homes, can be a lucrative and... Read More

Getting Grant Funding For Your Nonprofit Organization

Do you need grant funding for your nonprofit organization? If... Read More

How to Avoid the Most Common Reasons for Small Business Failure

The life cycle of the typical small business is short... Read More

Mission Statements: More Important Than You Thought

If an organization lacks a mission statement, it is worthwhile... Read More

Private Franchising is not Real a Real Franchise

One major issue not being addressed right now in the... Read More

Dynamics of Daylight Savings Time on Service Businesses in the United States

The Dynamics of Daylight Savings Time changes the way we... Read More

Top 10 Record Keeping Mistakes Business Owners Make (and How To Avoid Them)

If you interviewed business owners of failed businesses, a majority... Read More

Justice In Action

During the 1980 presidential campaign, candidate Ronald Reagan vowed, if... Read More

Small Businesses With Work Trucks; A Warning

If you are a non-operator owner of many work trucks,... Read More

Credit Repair Business Opportunities - Huge Profit Potential!

In the world today, many people are further in debt... Read More

Sex Up Your Business Growth

A top executive called up me late in the night.... Read More

Mobile Pressure Washing and Cleaning Scheduling

If you own a mobile car washing, pressure washing or... Read More

How to Start a Pet Transportation Business

Pet Transportation Services are needed as the number of pets... Read More

Accounting Methods ? Cash and Accrual

When starting a business, you have to determine the method... Read More

Cash Flow: Why Chaos Equals Poor Cash Flow

Recently one of my customers told me the chaos swirling... Read More

Belleville rental limo ..