Lawrence R. Jensen & Associates
Schedule a Consultation at:
408-465-0293

How do you choose between an S-corp and a C-corp?

Forming a corporation in California offers protection for your personal finances in the form of limited liability. Once formed, there are two different types of corporations for tax purposes: so called " S-corporations" and "C-corporations."

Though similar in some ways, each offers different advantages for your business, as well as potential downsides. The type you choose depends largely on your goals and objectives for the corporation. 

Similarities

According to Fundera, you have to file articles of incorporation with your state government to form either a C-corp or an S-corp. You will also have to issue stock to sell to shareholders, who become part owners of the company. The shareholders will then elect a board of directors that will oversee policy issues and management. Both types offer owners limited liability so that, if you are a shareholder, your personal income cannot go to pay private debts. 

Differences

Taxation is the big difference between a C-corp and an S-corp. The former pays corporate income tax; the latter does not. Additionally, an S-corp has requirements for shareholders that a C-corp does not. Specifically, a C-corp has no limit upon the number of shareholders allowed, while an S-corp can only have 100 or fewer.

Choices

An S-corp may be the better choice for you if you want to avoid double taxation that can occur when you have to pay both corporate taxes and personal taxes on company profits if you receive them as shareholder dividends. However, the advantages of a C-corp are that it is relatively easier to set one up, and because of the unlimited number of shareholders, it is easier to raise money for your business. 

The information in this article is not intended as legal advice but provided for educational purposes only.

No Comments

Leave a comment
Comment Information
Email Us For A Response

How Can We Help You?

Contact the Firm

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Lawrence R. Jensen & Associates
95 S. Market St.
Ste. 550
San Jose, CA 95113

Phone: 408-465-0293
Fax: 408-899-2403
San Jose Law Office Map

Avvo Top Attorney Real Estate 9.3 Avvo Clients' Choice 2012 Real Estate
Back to top