whats the difference between a c-corp and a s-corp?

Answer 1

Dear Miss,

Here are the different types of business organizations:

A sole proprietorship has the least amount of expense and headaches to setup and operate, but the also the least amount of liability protection. If you go bankrupt as a SP you must declare personal bankruptcy. Income and losses are taxed to you personally and also completely subject to Self Employment tax of 15%.

An LLC is an option that offers liability protection and is an organization that is more difficult to set up and operate than an SP but less than a Corporation. Income is taxed on your personal tax return as a "pass through". These taxes may be higher if you have income right away, but if you have losses they are deductible against ordinary income on your tax return. SET is due on your salary, but not necessarily on company profits.

An S- corporation has the same tax status as an LLC but is more complicated to setup and operate. If offers liability protections.

A C-Corp is the most complicated to setup and operate, but income is taxed at the corporate rates which can be less than the personal rates. If you sell assets from a C -Corp and then want the money for yourself, it will be taxed twice - once in the corp and once personally. But if you sell the entire business, you get the lowest possible tax rate, capital gains tax, currently 15%.

In short if you will have early losses and need liability protection do an LLC. If you will have a substantial business with lots of profits especially early on, do a regular C Corp. If you're dabbling here and have no real expectation of a meaningful business - do a Sole Proprietorship.

Good Luck,
Dana B - President

Answer 2

A c-corp and an s-corp have the same coverage of liability and about the same taxation rate.

The main difference is in an S-corp you take the deduction off your 1040 form sort of a personal deduction if you will.

A C-corp is it's own entity, a person of its own and takes its own personal deductions separate from the owner.

If you fall into alternative minimum tax (AMT) status a S-Corp is the way to go. Additionally, in either instance if the IRS can prove a break in the corporate veil you are held personally liable.

Answer 3

An LLC is a STATE designation. The IRS is a federal difficulty. in case you incorporate on the STATE point, the IRS sees you as a C company (which archives a style 1120) except/till you % to document as an S-corp (which archives a style 1120s). in case you do no longer incoporate, a multi-member LLC is a partnership(which archives a style 1065); a single member LLC is a sole proprietor (time table C). An S-corp status is achieveable right here if the varieties are filed. the biggest distinction is the C corp. The C corp archives that's very own returns, will pay wages to every physique performing centers and if there is earnings, will pay earnings tax. money left over is disbursed to shareholders as dividends and is taxed two times. An S-corp will pay wages, yet handed remaining earnings/expenses by way of to the shareholders as distributions. (Taxed as quickly as.) A partnership passes earnings by way of to the 1040. All earnings is venture to self employment taxes. the only prop. is going directly to the time table C, additionally venture to SE Tax.

Answer 4

The main difference is that a sub-chapter S avoids the double taxation of your traditional C-Corp.

Sub Chapter S is a tax status as filed with the IRS and as such you must first be a C Corp (the IRS will qualify you or not).

Other than that, they are very very similar.

Answer 5

Not enough to make it worthwhile to incorporate.

If you have more than one person involved, a limited liability partnership is much less restrictive, has much less paperwork, and fewer laws to contend with.