A corporation is a separate legal entity from its owners, providing significant advantages for business operations. As a distinct entity, a corporation can own property, enter into contracts, sue and be sued separately from its owners.
S corporation and C corporation designations are both valid choices when incorporating a business—and whichever you choose, we can help make it happen. Before you make your decision, make sure you understand the pros and cons of each.
Shareholders only pay taxes on profits received. Income gets passed through to the owners instead of being taxed at the corporate and shareholder level, so you avoid double taxation.
The maximum number of shareholders is 100, and they all must be U.S. citizens or residents.
S corporation owners can only get common stock, which comes with voting rights.
Income is taxed twice—the business pays corporate income tax on its net income, and then the shareholders also pay personal income tax on the profits they receive.
There are no limits on who and how many people can own shares of a C corp.
C corp owners may get preferred stock, which usually comes with no voting rights but priority to dividends before common shareholders.