S Corporation Vs C Corporation Quick Sheet

Choosing the right business entity type directly affects the company's financial bottom line. S Corporations and C Corporations have much in common but there are key differences.

Creation

Both S Corp and C Corp businesses must follow state specific guidelines and pay state specific fees to operate. Fees vary from state to state but a typical transaction includes Name Registration, Articles of Incorporation and Fictitious Name. In Arkansas, the total fees for these forms is $100.00 Both forms of corporation protect shareholders in that owners or shareholders are not generally liable for business debt or activities.

Funding

Corporations require capital or funds to operate. While both S Corp and C Corp sell shares of stock to raise capital, securities law applies to C Corp activities and stock ownership by S Corp businesses is limited.

Administration

Both S Corp and C Corp require the same administrative procedures. A board of directors is elected or chosen to mange the business. Meetings must be held at least once a year and reports of those meetings are to be filed at least once a year. Terms for directors are usually perpetual, or on-going unless unusual circumstances arise or the corporation is dissolved.

Taxation

For S Corp businesses, taxes are passed through to shareholders. For C Corp businesses, taxes are assessed at the corporate level. If shareholders receive dividends, this money is also taxable, resulting in double taxing. Salaries for both S Corp and C Corp entities are subject to self-employment taxes. Dividends are not subject to self employment taxation.

Transferability

Transferring interest in a C Corp is easily done. S Corp interest is also transferable but IRS regulations regarding stock ownership must be followed.