"C-Corp vs. S-Corp: Key Differences Explained"

The article compares C-Corporations and S-Corporations, outlining key differences in taxation, ownership, filing requirements, and flexibility. It highlights that C-Corporations face double taxation and have unrestricted ownership, while S-Corporations avoid corporate taxes but have limitations on shareholders and stock structure.

Aspect	C-Corporation	S-Corporation
Taxation Structure	C-Corporations are subject to double taxation: the corporation pays taxes on its profits, and shareholders pay taxes on dividends.	S-Corporations are pass-through entities: profits and losses are passed to shareholders and taxed at their individual income tax rates, avoiding corporate-level taxation.
Eligibility	No restrictions on ownership; can have unlimited shareholders, including entities and foreign individuals.	Limited to 100 shareholders, all of whom must be U.S. citizens or residents, and cannot include entities like corporations or partnerships.
Corporate Tax Rate	Subject to corporate tax rates as defined by the IRS (e.g., 21% as of recent tax laws).	No corporate tax rate applies since income is passed through and taxed at individual rates.
Dividend Taxation	Dividends are taxed again at the individual level as ordinary income or at capital gains rates.	No dividend taxation since profits are distributed directly to shareholders and taxed as personal income.
Loss Deduction	Losses cannot be passed through to shareholders; they remain at the corporate level.	Losses are passed through to shareholders and can be deducted on their individual tax returns, subject to limitations.
Filing Requirements	Must file Form 1120 for corporate taxes.	Must file Form 1120S for corporate information and Schedule K-1 for shareholder income reporting.
Flexibility in Ownership	Allows multiple classes of stock and ownership by entities, including other corporations.	Requires a single class of stock and restricts ownership to individuals and certain trusts.
State Tax Treatment	State taxation may vary, but most states follow the federal model of taxing corporate income and dividends.	State taxation may differ, with some states imposing additional taxes or fees on S-Corporations.

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