Snow Jensen & Reece, P.C.

Call Us 

“With the current COVID-19 heightened concerns within our communities, meeting our clients’ legal needs and concerns will be a priority of our firm. We are here to serve you. Being sensitive to your best interests and our community responsibility, we will be offering telephone and video conferencing for our current and future clients, including any new and developing matters you may have.”

Legal Experience And Local Roots

Offering professional legal services to individuals and businesses since 1986.

The benefits of setting up an S versus a C corporation

| Mar 30, 2018 | Business Organizations |

Once you become committed to setting up a business, choosing between the many different incorporation options can be difficult to do. A standard C corporation and an S corporation each carry with them different advantages and disadvantages.

When it comes to ownership of an S corporation, only those who are either resident aliens or U.S. citizens are allowed to own them.

While with a C corporation, multiple different limited liability companies, foreign entities, partnerships and other incorporated entities may be listed as the company’s owners, businesses aren’t allowed to maintain ownership over an S corporation. The latter type of corporation cannot have any more than 100 shareholders who also serve as company owners either. In contrast, a C corporation can have an infinite number of them.

As far as taxes are concerned, an S corporation’s taxes are passed though to the owners of the company. They therefore, must report any profits and losses they make when filing their own personal income taxes instead of on a business return. In contrast, C corporations are required to file corporate taxes with the Internal Revenue Service (IRS)and also report any company dividends on their personal one.

When filing taxes, C corporations are entitled to take a deduction for such benefits such as health insurance or disability payments they make.

Shareholders working for C corporations are not taxed on these benefits received provided that they offer the same to at least 70 percent of their staff. In contrast, if a shareholder in an S corporation maintains ownership of at least 2 percent of the company’s interests, then no deductions for such benefits can be taken.

The final difference between S and C corporations is that the former can only make an offering of one type of stock. The latter can offer various classes of it. Because a C corporation can offer different classes of stock, it allows them to assign different voting powers to different individuals, depending on the value of the stock held.

C corporations are also the only one of the two authorized to operate both domestically and globally as well.

If you’re considering setting up a corporation, then a St. George attorney can advise you of the benefits of selecting one type versus another.