Owning and operating a successful small business in Irvine can be a financially lucrative endeavor. As your business grows it may start to attract the interest of investors and high-level workers. Business owners who find themselves in this situation may start to consider incorporating. Two types of corporations that may interest them include the C corp and the S corp.
What is a C corp?
A C corp is generally what we think of when we think of a corporation. A C corp is a separate legal entity from its owners. This means that (with some exceptions) the owners are not personally liable for the actions and obligations of the C corp. C corps can offer stock options to investors and employees, which can ultimately help grow the business. It is important that you follow all state regulations when incorporating, as well as following the bylaws of the corporation. In addition, C corps face double taxation — once on the corporate tax return and again when stockholders pay taxes on dividends received.
What is a S corp?
An S corp, like a C corp, is a separate legal entity from its owners who are not liable for the actions and obligations of the S corp. Unlike a C corp, there is no corporation tax and thus no double taxation. The profits and losses of an S corp are taxed via the owners’ personal tax returns. In addition, the issuance of stock for an S corp is more limited than that of a C corp. Also, like C corps, S corps must follow state regulations and corporate bylaws.
Learn more about incorporation
C corps and S corps are only two types of corporations a business owner may be interested in. They each have their advantages and disadvantages. It is important that business owners thinking of incorporating explore all their options so they can make decisions that are in their best interests and the best interests of the company.