Business Structures in the United States - Part 3
C-Corporation
A C-Corporation is the most common type of corporation. A corporation of a business form that exists separated from its owners and it has articles of incorporation filed with the state. Ownership in the corporation is determined by ownership of the stock and shareholder’s risk is limited to the amount they invested in the corporation.
- The corporation is a separate legal entity and the share holders usually have protection from the debts and obligations of the corporation
- The corporation continues to exist if a shareholder dies or sells the company shares
- Easier to raise investment money
- Double taxation – income is taxed twice (corporate income tax and dividend tax)
- More expensive to form than other business forms
- More rules and regulations than with other forms of business
S--Corporation
The S-Corp is the same as a C-Corp, but it has a different tax structure. With an S-Corp, the corporation is taxed like a sole proprietor or partnership and it requires the organization to file IRS form 2553 within 75 days of incorporating.
- Shareholders can claim company losses on their personal tax returns
- Liability protection without having to pay corporate income tax
- Minimal self-employment and FICA tax
- Easier to raise investment money than with other business forms
- Limited number of shareholders with restrictions on who may become a shareholder
- More expensive to form than other business forms
- More rules and regulations than with other forms of business
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