Overview of C Corporation vs. S Corporation and LLC
A C corporation (C Corp) protects owners’ assets from creditors. Unlike an S Corporation or LLC, it pays taxes at the corporate level, subject to double taxation. A C-corp can offer various stocks, attracting investors. An S-corp is limited by the IRS on stock type and shareholders. A C corp must comply with more state requirements than an LLC.
Establishment of a C Corporation
- Select and obtain a corporation name.
- Appoint officers.
- File articles of incorporation.
- Adopt bylaws.
- Elect directors.
- Hold meetings.
- Keep minutes.
Pros and Cons of C Corporations
Pros:
- Perpetual existence – Death of owner doesn’t affect corporation.
- Limited liability – Assets protected from company debts.
- Attract investors – Can raise capital by selling shares.
- Attract talent – Offer stock options and benefits.
Cons:
- Double taxation – Taxed at both corporate and shareholder level.
Factors to Consider When Choosing Between C Corp and S Corp
- Why choose C corp over S corp?
- C corp is the standard corporation for IRS rules.
- C corp better for raising venture capital.
- C corp allows US-based and foreign shareholders.
- C corp allows unlimited shareholders and multiple stock classes.
Advantages of a C Corporation
A key advantage is: It avoids double taxation by having its income taxed as if a partnership.
Conclusion
Contact lawyers to choose between "C Corp" or "S Corp". Expert business attorneys are your best bet. How you incorporate is of highest importance.