Comparison of C Corps and S Corps
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C corps:
- Pay corporate tax
- Offer flexible profit-sharing like dividends not subject to taxes
- Appeal to investors seeking tax efficiency
-
S corps:
- Pass through profits and losses to owners
- Avoid double taxation
- Better for small companies
Ownership and Taxation Differences
- Ownership and Taxation in S Corps and C Corps:
- S corps limit 100 investors
- S corp owners pay tax at individual rates
- S corps usually can’t use C corp net operating losses
Tax Obligations for Corporations
- Tax Obligations:
- C corps pay estimated taxes if owing over $500
- Supporting schedules attached to C corp tax returns
- All C corps and LLCs taxed as corps file tax return and pay $800 annual franchise tax minimum
- C corps pay state tax first, then shareholders pay tax on dividends
Additional Insights
- LLCs becoming S corps by filling out Form 2553
- S corps assign reasonable salary
- No REITS or funds recommended
- Qualified dividend blue chip corps below value better than weird stuff
- LLCs growing faster than S corps