Should you choose an S-corp or C-corp?

On Behalf of | Dec 28, 2020 | Business Law |

Both S corporations and C corporations are helpful business formats to consider. They differ slightly, though, which is why it’s a good idea to learn more about them before you decide that you want to build your company in one of these formations.

Here are a few things you should know about each of these business formations and what they’ll mean for your business overall.

S Corporations

To start with, an S corporation is one of the preferred choices for smaller corporations. It has only one level of taxation and can have up to 100 shareholders. With an S-corp, your business’s shareholders do have to be U.S. citizens, and your business can have only one class of stock. You’ll need to file taxes separately from your personal taxes.

This kind of corporation may not work for you if you want to take your business public or work internationally.

C Corporations

C corporations are different because they make it easier to take your business public and to go international. You’ll have liability protection against lawsuits and be able to have unlimited shareholders. You can ask for funds from outside investors, and shareholders can buy any amount of interest in your company.

Both of these are beneficial to a business owner, but what you want to do with your business may determine which is right for you. If you don’t plan on working internationally or offering shares, then an S-corp may be fine for you. If you want to take your business internationally, the C corporation is one option that may work. Your attorney can give your more information as you begin considering different business structures for your organization.