C Corprations
About C Corporations
This type of corporation is perfectly set up for those to whom do not qualify to be an S Corporation, such as a public held company that has thousands of shareholders, lots of classes to stocks, and sells its stock to anyone (corporations, individuals, retirement plans, etc).
Taxation of C Corporations
A C Corporation pays taxes on all its profits first at the corporate level and then when the dollars are paid out to the owners in subsequent years, the owners pay tax again at the individual level. C Corporations, therefore, are exposed to a “double taxation” that none of the other entity types are exposed to. If you think taxes are bad enough paying them once, try paying them twice. OUCH!
Converting from a C to an S Corporation
A C Corporation can make a timely tax election to become an S Corporation and start taking advantage of tax advantages of being an S Corporation. Care should be taken to ensure that all shareholders understand and agree to become an S Corporation and that there are no or relatively insignificant net operating losses that might still be utilizable if you were to stay a C Corporation. Then after these are utilized/considered, we would effect the change.
Sphere: Related Content