Business Incorporation: S Corp

          There are many similarities between an S Corp and C Corp. They are both separate legal entities and have a similar internal structure. The limited liability protection basically keeps the owner or owners safe from personal responsibility for debts. They both are legally required to follow the same yearly requirements regarding bylaws, statements of information, and paying fees. However there are some very distinct differences that must be clearly understood.

          The largest difference revolves around taxation. C corporations are their own entities and file taxes at the corporate level. An S corporation is considered a pass-through entity. This means that all profit or loss goes through the business and is reported on the owners’ personal Tax Return. The owners’ will pay the tax on their level. There is a limit of 100 shareholders in an S corporation and they must all be US citizens. In this way, S Corporations are considered to be a less flexible option. This may or may not be true depending on what goals you have for your business.

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