C Corporation vs S Corporation – WHAT'S THE DIFFERENCE?

Now we see the difference of C corporation and S corporation.

C Corporations, or “C Corps” as they’re commonly known, are the primary format of publicly held companies. Their shares can be easily bought and sold on public stock exchanges since there is no limit on the number of shareholders they can have. In addition, unlike S Corporations, C Corp shareholders are not limited to natural persons (can be corporations or partnerships), nor is there a requirement that they be US residents or citizens.

C Corp status enables a business to function as a separate legal entity, able to enter into contracts, borrow money, hire employees and perform all other business functions without personal guarantees from its shareholders. This separation enables shareholders to participate in the company’s profits, but without the potential liability that a sole proprietor or partner would have in the event of liabilities, lawsuits and income tax obligations.

S Corporations, or “S Corps”, are similar to C Corps in that they are owned by shareholders, and provide all the same legal protections from debts, lawsuits and other company liabilities. They can also conduct business as a separate legal entity from their shareholders, including the hiring of employees.

In order to become an S Corp, the business must file IRS Form 2553 (Election by a Small Business Corporation) with the Internal Revenue Service, and meet the following requirements:

The business must first be either a C Corp or a Limited Liability Company (LLC) (which have the option to elect to be taxed as a corporation)The maximum number of shareholders is 100. Shareholders must be natural persons, not partnerships or other corporations. The business must be a domestic corporation, and its shareholders must be

S Corporation vs. LLC – WHAT'S THE DIFFERENCE?

Hi ,,,,Many businesses – small ones in particular – make the decision to seek some type of legal and liability protections, as well as special tax treatment. This is typically done through adopting a business organization form that will effectively separate the business owner(s) from the business itself. In doing so, the obligations and liabilities of the business become the responsibility of the business entity, and not its owners.

Two prominent forms of ownership are corporations and limited liability companies (LLC’s). Each will provide the needed liability protection as well as certain income tax advantages. Corporation status is generally more formal in its structure and can be better suited to large, established businesses. LLC’s, being less rigid, tend to work better for newer and smaller businesses.

(NOTE: This discussion will limit consideration of Sub-chapter S corporations (“S corporations”) in order to minimize an already complex comparison.)

S Corporations are distinct legal entities created under state law. They enable business owners to separate themselves, legally and financially, from the business itself. This provides a strong level of protection for owners from creditors and lawsuits seeking financial compensation from