WHAT IS THE DIFFERENCE BETWEEN A C CORPORATION AND AN S CORPORATION?

Operationally, the two corporations are the same. The only difference is how each entity is taxed. A C Corporation is subject to the double taxation, where the corporation is taxed once on its profits, and then if any shareholder dividends are issued, the shareholders are then taxed on those dividends.

With an S Corporation, however, all of the profits and losses of the corporation flow down to the shareholder level where the money is only taxed once. Not every corporation can qualify to be an S Corporation. For example, the corporation must have less than 100 shareholders, it must only have one class of stock (i.e., you cannot have common and preferred shares), and, generally speaking, every shareholder must be an individual. There are additional rules and restrictions that apply.


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