C Corporations vs S Corporations Explained

What is the difference between a C Corp and S Corp? How are C Corps taxed? How are S Corps taxed?

A C Corp is a separate taxpayer, with income and expenses taxed to the corporation and not owners. You can elect S corporation status by filing a form with the IRS and with your state as it is more attractive for small-business owners. Once applicable, the profits, losses and other tax items pass through the corporation to you and are reported on your personal tax return This is considered a flow-through entity.

Both S and C Corps;
- Offer limited liability protection
- Require articles of incorporation
- Can offer a way to sell equity

S Corps are different;
- They have a 75 shareholder limit (for businesses started before 2004) and a 100 shareholder limit for those started after 2004
- No corporate taxed is paid which can save owners a lot of money

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