Difference Between C Corp and S CorpShare this post
Learn the Difference Between a C Corp and S Corp
According to business law firm in Des Plaines, there are two main types of business structures: the C corp and S corp. Both have unique benefits and drawbacks. So how do you know which is right for your business? This article will discuss the differences between a C corp and S corp, so you can decide which structure is best for your company.
What is a C Corporation?
According to business lawyers in Des Plaines IL, a C corporation is a for-profit corporation taxed separately from its owners. This means the corporation is responsible for paying taxes on its income, and the shareholders are not liable for any corporate tax debts.
The main benefit of this structure is that it offers limited liability protection to the shareholders. So, if the corporation becomes insolvent, the shareholders will not be liable for any debts.
Another benefit of a C corporation is that it can raise capital by selling shares of stock. For example, if you want to open a restaurant in Des Plaines IL, you would likely form a C Corporation. This is because restaurants are high-risk businesses, and you want to protect your assets in case the business fails.
The main downside of a C Corporation is that it can be subject to double taxation. The fact that your corporation is subject to pay taxes based on its income separate from shareholders’ — there is double taxation in each dividend.
Be sure you contact a Des Plaines IL C Corp attorney to discuss this in more detail and see if a C Corp is the right business structure for your company.
What is an S Corporation?
An S corporation is a for-profit corporation taxed as a pass-through entity. This means that the corporation’s income gets passed on to the shareholders. These shareholders are then responsible for paying taxes on their share of the revenue.
The main benefit of this structure is that it can save shareholders money on taxes. This is because S Corporations are only taxed once, at the shareholder level. Another benefit of an S corporation is that it offers flexibility when it comes to distributing profits and losses. For example, if you have an S Corporation with two shareholders, you can choose to distribute the profits and losses in any way you see fit.
The main downside of an S corporation is that it can be subject to strict requirements. For example, S Corporations need to have fewer than 100 shareholders and only one class of stock.
For more information contact a Des Plaines IL S Corp attorney to discuss this type of corporation.
Which Type of Corporation is Right for You?
Comparing the C and S corporations now gives you the insight into their differences in terms of their tax systems, liability protections, and how to raise capital. The answer on which type of corporation is right for you and your business depends on your specific business needs and goals.
If you want the flexibility to distribute profits and losses as you see fit, an S Corporation may be a good option. Your goal is to raise capital by selling shares of stock, then a C Corporation may be the better choice.
If your biggest worry is about liability, a C Corporation offers limited liability protection to its shareholders. However, talk to a Des Plaines IL corporate attorney before deciding on this business structure.
No matter which type of corporation you choose, it is important to work with experienced business lawyers in Chicago to ensure that you are complying with all the necessary legal requirements.
How Can Des Plaines Business Attorneys Help?
If you are thinking about forming a C or S corporation in Illinois, working with an experienced Des Plaines IL S Corp attorney is an advantage if you are planning to target an S Corp type of business.
On the other hand, professional guidance from a Des Plaines IL C Corp attorney is also essential if you are planning to have a C Corp business structure.
At Anthony J. Madonia & Associates, we have helped countless businesses in Des Plaines and the surrounding areas with all their legal needs, and we can help you too. When looking for a corporate attorney in Chicagoland, contact us to schedule a consultation.