If you are planning to start a new business or thinking about restructuring your business organization then you should learn about all the different types of corporations that you can form. Small business owners can either form S corporation or C corporation. While the C corporation is a regular corporation, the S corporation is a special form of business that has elected a special tax status with IRS.
However, to form a S corporation, you have to file Form 2553 with IRS and meet all guidelines of S corporations as enumerated by law. Although C corporation and S corporation have several similarities, they also exhibit several dissimilarities. Some of the similarities between C corporation and S corporation include limited liability protection, entity structure, perpetual existence and corporate structure. Both forms of organization have to submit their incorporation documents with the state and they have to elect the board of directors.
S corporation and C corporation need to elect the board of directors after selecting a name for the business. Your business name should either have LLC or limited liability corporation name within it. Further, your business should at least consist of one director. This applies to both C corporation and S corporation.
However, despite the similarities, the most significant difference between C corporation and S corporation is that C corporations file Form 1120 as corporate tax and they face the problem of double taxation. On the other hand, S corporations file an informational Form 1120 S return but they do not pay any income tax at the corporate level.
C corporations have to suffer from double taxation as tax is paid at the corporate level as well as at the individual level. On the other hand, S corporations only have to file tax at the individual level of the owners.
Dissimilarity between C corporations and S corporations is that C corporations have no limit on the number of shareholders. However, S corporations can have only 100 shareholders and all these shareholders must be US citizens or residents.
To become a S corporation, you will have to file form 2553 with IRS which can be a tedious task unless you are willing to go through the entire procedure. However, Signature Filing can make the procedure easy for you and help you to register your business as either S corporation or C corporation according to your needs. LLC formation is an easy task with Signature Filing because they will not only help with incorporation but also regulate your taxes and file your taxes in accordance with your organization.