Question

What are some similarities and differences between how income is calculated for C corporations and S corporations?

Please comment on both C corporations and S corporations.

Answer 1

Similarities of C Corporations And S Corporations :

1. Separate legal Entities : Both C and S corporations are separate legal entities formed by state filing.

2. Structure : Both Corporation have similar structures i.e both corporations have shareholders ,directors and officers

3. Limited Liability protection : These C and S corporations has only limited liability,share holders of these corporations are not personally responsible for liabilities of the corporations.

4. Corporate Formalities : The compliance responsibilities are same for both C and S corporations.

Differences Between C and S Corporations :

1. Taxation Basis : C corporations are separately taxable whereas S corporations are pass through taxation entities.

2. Tax Liability : In C corporations Tax Income tax is paid at corporate level and S corporations tax is paid by individuals i.e Owners of corporations.

3. Number of shareholders : There is no limit on number of shareholders to C corporations but, for S corporations It is limited to 100 only.

4. Shareholder restrictions : Shareholders of S corporation must be individuals and U S citizen Residents but there is no restrictions for C corporations.