S corporations and C corporations differ in how they and their shareholders pay taxes. C corporations pay income and revenue taxes, while S corporations avoid double taxation. Both provide shareholder protection, but S corporations have restrictions on the number and type of shareholders.
There are a number of differences between an S corporation and a C corporation, although how the corporation and its shareholders pay taxes is the primary difference. AC Corporation is essentially a basic corporation that has stock, shareholders, and corporate protection from liability in the event of a lawsuit or other legal action. While an S corporation has the same protection for the shareholders who own the corporation, the shareholders of this type of corporation pay personal income tax and the corporation does not. This elimination of double taxation is the main difference between an S corporation and a C corporation.
There are a number of similarities shared by an S corporation and a C corporation. Both types of corporations begin with incorporation procedures that allow ownership of the corporation to be established through ownership of stock or shares in the corporation. A corporation and public limited company both provide corporate protection for those shareholders, so they have no personal liability to the company other than the investment they make in purchasing stock or shares. This means that if a lawsuit is filed against such a company, only the company itself, as a separate entity, is liable for court-ordered damages or damages, not the people who own the company.
The main difference between an S corporation and a C corporation is how income taxes are paid by the corporation and its shareholders. AC Corporation is basically a standard company. At the end of a tax year for a C corporation, the corporations must pay income and revenue taxes. The individual shareholders of a C corporation must also pay personal income taxes based on the profits they make as shareholders of the corporation, effectively paying double the taxes on the corporation’s profits.
An S corporation, on the other hand, avoids this double taxation. While the shareholders of an S corporation continue to pay personal taxes, the corporation itself does not pay taxes on its revenue basis. This means that the shareholders of an S corporation pay taxes only once on the revenues and profits made by the corporation, while still providing personal protection from the corporation’s liability. Other differences between an S corporation and a C corporation include the maximum number of shareholders for the corporation, which are limited for S corporations, and restrictions on who can be a shareholder in an S corporation.
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