C Corporations versus S Corporations
It is important to work with an incorporation company that understands and can explain to you the difference between a C corporation and S corporation as the wrong choice can cost you thousands of dollars. The income of a C corporation is taxed, whereas the income of an S corporation (with a few exceptions) is not taxed under the Federal income tax laws. The income, or loss, is applied, Pro Rata, to each Shareholder and appears on their tax return as Schedule E income/(loss). Unlike corporations treated as S corporations, a corporation may qualify as a C corporation without regard to any limit on the number of shareholders, foreign or domestic. Impact Since corporations are state entities and the C corporation status refers to the tax treatment of these corporations by the federal government, the C corporation’s impact is mostly relegated to the tax realm. The impact of double taxation, the taxation of the corporation’s income and the separate taxation on their dividends, constitutes the impact of the C corporation treatment. C corporations are subject to this double taxation unlike S corporations and most other business entities taxed by the federal government.