What are the Differences Between a C and an S Corporation?
As a Hartford County, Connecticut Business Lawyer I get asked, what is the difference between a C Corporation and a S Corporation?
A C Corporation is on a default tax treatment by the IRS. In those circumstances, the corporation will be taxed and then any distributions of earnings will be taxed again at the shareholder level. This actually has its advantages because you can make an election at the management level in the C Corporation to retain those earnings and reinvest them so they’re not subject to taxation. The other differences with a C Corporation is that the shares of a C Corporation are freely transferable, the nature of the activities of the business are open-ended and the number of the shareholders is likewise unlimited.
In an S Corporation, there is pass-through tax treatment, the nature of the business can be limited, and the ownership of the shares can also be limited. These are the basic differences between a C Corporation and an S Corporation.