What You Should Know About Subchapter C and S Corporations

When starting a business, there are a lot of specifics you’ll have to look into. You’ll need a building, and it should be one that will accommodate what you plan to do. You’ll possibly need employees or a business partner. You may have equipment to purchase and supplies to secure. Insurance is something to get going right away, and there are so many other important items to take care of.

One important step is setting up the business to begin with. You may have heard of an LLC before, and many companies have been successful with this setup, but what are S corporations and C corporations? The following outlines a couple of the main differences.


If you set your business up as a C corporation, you’ll pay taxes on the company income. You’ll also pay tax on income received as owners and employees. If you set your business up as an S corporation, you won’t pay any tax as a company. The revenue will be listed on the owners’ taxes as personal income.


If you plan to setup as an S corporation, you are limited to 100 U.S. citizen shareholders. One benefit of doing this is it creates a more personal feel for the shareholders. When they want to share an opinion or an idea, they don’t have to worry it will get ignored among thousands of owners. An S corp is a great way to avoid ranking within the company.

If you plan to go with a C corporation, there are no restrictions. You can have shareholders from all over the world, and you can include as many people as you want to include. Doing this comes with benefits as well. For example, there isn’t as much paperwork for a C corp as there is for an S corp. This makes it easier to form the business. It’s also easier to sell the company in the future as a C corp.

Deciding Which to Choose

When you start a business, it may be hard to decide which type of company to set up. Should you go with an LLC? How about an S corp or a C corp? You’ll want to think about the future of your business, whether you want to limit shareholders, if you’re OK with double taxation and how much paperwork you’re OK with doing. If you’re still unsure, you can always seek a legal opinion. Contact a business lawyer, such as from Brown Kiely, LLP, today for answers to your questions.