Business Experts: A Question

[kiddiedoc]

Can anyone with expertise break down the differences between an S Corp and a C Corp? Advantages/Disadvantages for a small corporation would be appreciated. Thanks in advance!

(sorry about the lack of a "dash" in the above, but my replacement Dell keyboard is in the mail...)

 

[GAVol]

This is off topic, but I am moving this to the Politics forum so it won't get buried in the Pub and that's where the people that can answer this best hang out the most anyway.

 

[kiddiedoc]

OK, no problem. It's really a "business" question, but wherever you feel it will be most adequately addressed is good with me!

 

[GAVol]

OK, no problem. It's really a "business" question, but wherever you feel it will be most adequately addressed is good with me!

I left a permanent redirect, so effectively it's in both forums.

It might also be useful if you'd tell us how many shareholders you have and what you are trying to accomplish. I assume we're talking a group of physicians trying to pay themselves a fat salary and avoid taxes . . . but I'll let you clarify.

 

[kiddiedoc]

3 partners, forming a corporation, all shareholders (probably divided based on seniority). The latter is a given.

 

[bamacheats]

S corp is sole proprietor with corporate tax advantages. I believe that still dominates the small biz platform.

Major dif between the two is paperwork. No big deal unless you are paying a cpa to do your paperwork.
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[bamacheats]

3 partners, forming a corporation, all shareholders (probably divided based on seniority). The latter is a given.

Prob a llcp.
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[GAVol]

3 partners, forming a corporation, all shareholders (probably divided based on seniority). The latter is a given.

Sounds like you need the pass through advantages of an S-Corp or LLC. I'd think LLC would be the easiest.

 

[Vol423]

I'm going to provide you a few links that you may find useful. However, as has been aluded to by others, the primary difference is that C corporations are taxed at the corporate level. However, any dividend payments to the shareholders of a C corporation are then taxed again. The net income or net loss of an S corporation, on the other hand, passes to the shareholders of the S corporation, and they pay taxes on their respective share of the net income or loss through the filing of their personal tax returns. One huge advantage of an S corporation over a C corporation is that net losses can be passed on to the shareholders of an S corporation, thereby allowing them to potentially offset personal income from other sources.

http://cpa-services.com/special_sco.shtml

http://www.themoneyalert.com/Corp-Entity-Table.html

http://www.thinkinglike.com/S-Corporation/S-corporation-vs-C-corporation.html

I have no affiliation with any of these sites. However, they each touch on different aspects that you may want to consider.

As mentioned by others, you should also definitely consider structuring your business as an LLC.

 

[kiddiedoc]

Thanks for the above links...very helpful. In the end, I'm not sure that it's going to make much difference (S versus C), as there shouldn't really be much net gain or loss if we pay ourselves accurately (= collections minus expenses). There aren't outside investors, and we have no interest in selling stock options.

We have not discussed an LLC. What would be its advantage? From one of the above charts, it looks like it protects against personal liability, as well.

 

[tigervol9802]

Thanks for the above links...very helpful. In the end, I'm not sure that it's going to make much difference (S versus C), as there shouldn't really be much net gain or loss if we pay ourselves accurately (= collections minus expenses). There aren't outside investors, and we have no interest in selling stock options.

We have not discussed an LLC. What would be its advantage? From one of the above charts, it looks like it protects against personal liability, as well.

Any of the three will protect you against personal liability.

I'm willing to bet when push comes to shove your accountant says professional corporation (which is a type of C-corp) though.

 

[tigervol9802]

S corp is sole proprietor with corporate tax advantages. I believe that still dominates the small biz platform.

Major dif between the two is paperwork. No big deal unless you are paying a cpa to do your paperwork.
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LLCs are becoming the new fad. Much easier to set up and operate and basically give you the advantages of corporations and partnerships.

 

[BigPapaVol]

Thanks for the above links...very helpful. In the end, I'm not sure that it's going to make much difference (S versus C), as there shouldn't really be much net gain or loss if we pay ourselves accurately (= collections minus expenses). There aren't outside investors, and we have no interest in selling stock options.

We have not discussed an LLC. What would be its advantage? From one of the above charts, it looks like it protects against personal liability, as well.

It will matter in S vs C. One gives much better tax payment flexibility. Depending on the bigger rate, your accountant can decide how to classify payments to better take advantage of your situation with S Corp. LLC is the modern, more wieldy, S Corp. The decision between income payouts our cash distributions will be purely a function of marginal rates vs cap gains vs dividend taxation.
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