Question

examine corporations and S-corps by determining similarities and differences?

Answer 1

C corporation :- A c corporation is a business term that is used to distinguish the type of entity from others,as its profits are taxed separately from its owners under subchapter c of the internal revenue code.   S corporation :- in an s corporation ,the profits are passd on to the shareholders,and are taxed based on personal returns.

* Similarities :-

1.separate entities :- Both the s corp and c corp are separate legal entities created by a state filling. 2.corporate formalities :- Both are required to follow the same internal and external corporate formalities and obligations such as issuing stock, holding shareholder etc. 3.limited liability protection :- Both offer limited liability protection,so shareholders (owners) are typically not personally responsible for business debts and liabilities. 4.filling documents :- formation documents must be filled with the state. These documents typically called the articles of incorporation or certificate of incorporation,are the same for both c and s corporation.

* Difference :-

  1.taxation :- ​

   C corporation :- c cors are separately taxable entities.they file a corporate tax return (form 1120) and pay taxes at the corporate level.they also face the possibility of double taxation if corporate income is distributed to business owners as dividends, which are considered personal income.tax on corporate income is paid first at the corporate level and again at the individual level on dividends. S corporation :- s corps are pass through tax entities.they file an informational federal return. (form 1120s) but no income tax is paid at the corporate level. the profits/losses of the business are instead "passed through" the business and reported on the owners personal tax return.

2.corporate ownership :-

   C corporation :- c corps have no restrictions on ownership. C corporation have multiple classes.c corporation provides a little more flexibility, when starting a business if you plan to grow, expand the ownership or cell your corporation. S corporation :- s corp have restrictions on ownership. S corps are restricted to no more than 100 shareholders, and shareholders must be US citizen/residents.s corporation cannot be owned by c corporation. Also, s corporation can have only one class of stock (disregarding voting rights).

3.formation :-

   C corporation :- a c corporation may be converted to an s corporation by filling IRS form 2553, election by a small business corporation, with the internal revenue service. S corporation :- to obtain s corporation status for a certain year, form 2553 must be filled no later than march of that year for corporation operating on a calendar year basis.