C Corporation vs. S Corporation

The biggest difference between C and S corporations is taxes. C corporations pay tax on their income, plus you pay tax on whatever income you receive as an owner or employee. An S corporation doesn't pay tax. Instead, you and the other owners report the company revenue as personal income.

1. What is the difference between C corporation and S corporation?
2. Is an LLC an S or C corporation?
3. Why would you choose an S corporation?
4. Is a single-member LLC an S Corp or C Corp?
5. What is a disadvantage of an S corporation?
6. Is an S Corp Public or private?
7. Who pays more taxes LLC or S Corp?
8. Am I considered self employed if I own an S Corp?
9. When should I convert from LLC to S Corp?

What is the difference between C corporation and S corporation?

The C corporation is the standard (or default) corporation under IRS rules. The S corporation is a corporation that has elected a special tax status with the IRS and therefore has some tax advantages. Both business structures get their names from the parts of the Internal Revenue Code that they are taxed under.

Is an LLC an S or C corporation?

An LLC is a legal entity only and must choose to pay tax either as an S Corp, C Corp, Partnership, or Sole Proprietorship. Therefore, for tax purposes, an LLC can be an S Corp, so there is really no difference.

Why would you choose an S corporation?

One major advantage of an S corporation is that it provides owners limited liability protection, regardless of its tax status. Limited liability protection means that the owners' personal assets are shielded from the claims of business creditors—whether the claims arise from contracts or litigation.

Is a single-member LLC an S Corp or C Corp?

By default, a single-member LLC (SMLLC) is treated as a disregarded entity by the IRS. However, the member can opt to instead be taxed as a C or S corporation to avoid self-employment taxes. An S corporation is a special corporate designation that also enjoys pass-through taxation and avoids corporate income tax.

What is a disadvantage of an S corporation?

An S corporation can have only one class of stock, although it can have both voting and non-voting shares. Therefore, there can't be different classes of investors who are entitled to different dividends or distribution rights. Also, the number of shareholders is limited - there cannot be more than 100 shareholders.

Is an S Corp Public or private?

S corporations and C corporations are similar to public companies with shareholders. However, these types of companies can remain private and do not need to submit quarterly or annual financial reports.

Who pays more taxes LLC or S Corp?

S Corps have more advantageous self-employment taxes than LLC's. S Corp owners can be considered employees and paid “a reasonable salary.” FICA taxes are taken out and paid on the amount of the salary.

Am I considered self employed if I own an S Corp?

Technically, you are self-employed if your income comes from business you engage in as an individual or sole proprietor vs LLC, or as a general partner in a business. ... If you own and operate a corporation, however, you are not technically self-employed, but an owner-employee of the corporation.

When should I convert from LLC to S Corp?

The right time to convert your LLC to S Corp

From a tax perspective, it makes sense to convert an LLC into an S Corp, when the self-employment tax exceeds the tax burden faced by the S Corp. In general, with around $40,000 net income you should consider converting to S Corp.