Comparing C Corporations to S Corporations
The "C" and "S" refer to special tax elections found in the Internal Revenue Code. Starting a C Corporation or an S Corporation begins with the same filing at the state level. For this reason, these two types of business structures share many characteristics. Both allow owners to separate and protect their personal assets from business debts and issue stock. However, the S Corporation tax election allows owners to report their share of profits or losses in the company on their personal tax returns. S Corporations have more restrictions on shareholders and stock issuance than C Corporations.
| C Corporations | S Corporations | |
|---|---|---|
| Limited Liability | Owners can protect personal assets | Owners can protect personal assets |
| Taxation | Taxed on corporate profits and shareholder dividends | Pass-through taxation |
| Stock | Raise capital by selling stock | Raise capital by selling stock |
| Number of owners | No limit | Maximum of 100 |
| Type of owners | Other companies may own a C Corporation | Individuals only |
| Citizenship/residency | No restrictions on citizenship or residency | Owners must be U.S. citizens or residents |
| Annual meetings | Required | Required |
Still deciding between a C Corporation and an S Corporation? Call a Business Specialist for more information at 1-800-499-9519 (toll-free) or 1-302-636-5460. We'll help you save time and money on the business formation process.
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