When an individual becomes to own a small business he or she must make the choice about business structure.
In this article, we show you a TAX difference between S- and C-Corporations. This helps you decide which business structure suits to you.
All Corporations are founded as C-Corporations. To become an S-Corporation you must file special IRS Form 2553 and receive the letter from IRS that you are S-Corp :
Also, both structures have mandatory fees and ongoing fees like the annual report (make sure your company has an ACTIVE status). Both forms of business must have EIN (Employee Identification Number)
C-Corporations are subject to double taxation. This means that the business is taxed, and shareholders are also taxed on their individual income.
C-Corporation can be found by foreigners. C-Corp owners must file Form 1120.
S-Corporations avoid double taxation on corporate income. Shareholders of S-Corporations report the pass-through of income and losses on their personal tax return and are assessed tax at their individual income tax rates.
S-Corporation can be found by a person who has SSN. S-Corp owners must file Form 1120S
Also, when you choose to sell your business it may be beneficial to do so as S- Corporation. Taxable gains are usually less for S-Corp than for C-Corp.
S- Corporation | C-Corporation |
Taxed once | Taxed at a corporate level |
Pass-through income | Dividends get taxed again |
Can convert to C-Corp | Can’t easily convert to S-Corp |
Less than 100 shareholders | No restrictions on shareholders |
How to start:
Tell us about your business. We complete the form in 10 minutes
Then we prepare all documents and sending directly with the Secretary of State.
Checklist for New Corporation:
Decide on a corporate name (choose several names for the corporation, we should be sure your name is unique)
Address in the State. We also provide an address in the State of Illinois (some businesses need it)
Your Name, Last name, and valid SSN
Fee (it depends on State)
When your corporation’s documents have been approved by the Secretary of State, we’ll send a corporation package by mail.
Congratulations! You are a business man/women.
Ready to start a Corporation? Call us (800) 913-0809. We complete the form in 10 minutes!