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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622 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.