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What is the difference between a C corp and an S corp?

On Behalf of | May 6, 2022 | Business Law

Your business has been growing over the years and has become a very lucrative enterprise. Investors are attracted to your business, and you may wonder if now is the time to go public. If so, you will want to know your options for incorporating your business.

Is a C corp right for you?

A standard corporation is sometimes referred to as a C corp. C corps are independent legal entities. This means the owners will not be personally liable for the acts and debts of the corporation. It also means the corporation will be taxed independent from its owners and the corporation can make a profit independent of its owners. However, corporations are subject to double taxation: once on its profits and once when shareholders file their personal tax returns.

Is an S corp right for you?

An S corp is similar to a C corp. Unlike a C corp, however, S corps are not subject to double taxation. An S corp’s profits and certain losses are taxed through the owner’s personal income. S corps are not bound by corporate tax rates. However, not every state recognizes S corps as a business entity. These states will treat S corps as C corps.

Are you ready to incorporate?

C corps and S corps are two common types of corporate structures. You may be interested in other types of incorporations such as benefit corporations, close corporations and nonprofit corporations. The first step is to learn about all your options so you can make decisions that are in the best interest of your business.