Contact UsAs An Entrepreneur I Am Trying To Make A Decision As To How To Set Up The Company. Can You Tell Me The Benefits Of A C-Corp Versus An S-Corp? What Are The Advantages And Disadvantages Of Both If I Sell The Company?
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Tax Professional Answers
Lisa Nason CPA, MST
C corporations are taxed twice, at the corporate and shareholder level. S corporations are generally taxed at the shareholder level only, unless the entity was a C corporation in the past. This is one of the big advantages of an S corporation.
For a corporation – it pays tax on its taxable income but the shareholders are not taxed unless they receive distributions. With an S corporation, you pay tax on your pro rate share of income, whether its distributed or not. If the S corporation is profitable, you may need to make a distirbution to the shareholders to cover their taxes.
If you sell the company, you would pay tax on the gain from the sale – generally at capital gains rates.
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321 weeks ago
For a corporation – it pays tax on its taxable income but the shareholders are not taxed unless they receive distributions. With an S corporation, you pay tax on your pro rate share of income, whether its distributed or not. If the S corporation is profitable, you may need to make a distirbution to the shareholders to cover their taxes.
If you sell the company, you would pay tax on the gain from the sale – generally at capital gains rates.