Types of Corporations: C-Corporation vs S-Corporation (Which Is Better?)

Types of Corporations

Once you have begun to establish a new business, you will face the daunting task of deciding which type of business it will be.

With several different options, how can you know which type of corporation is the best way to go?

My overview of each corporation type should give you a good idea of which one is best for your company.

In Summary, S-Corporation is great for self-employed entrepreneurs if you’re making more than $80k/year. If you’re making less than $80k/year, LLC is better.

Also, keep in mind that the biggest disadvantage of C corporations is that they are “double taxed.” When a C corporation earns income, the C corporation is taxed. Then anytime the corporation issues a dividend, the shareholders are taxed on the amount they receive. As a result, the income is “taxed twice.”

On the other hand, an S Corporation is a special type of corporation created through the IRS. By electing to be treated as an S Corporation, the corporation can avoid double taxation.

What makes the S Corporation different from a traditional C Corporation is that profits and losses can pass through to your personal tax return.