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81. TAX Comparison Between S- and C-Corporations

Updated: Nov 17, 2022

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


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!

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