Most known companies as stated above, follow C-Corp setup, while very few follow an S-Corp. The major difference between the two types of corporations is the taxation. With C-Corp, there is a required double taxation. As a result, first the corporation gives taxes from the profit that is made. What is left over after those taxes is then split among the shareholders, who then have to pay personal taxes on what they receive. With the S-Corp, there is only a single taxation, which is after the profit is split among the shareholders. There is also more restriction when following an S-Corp, such as having all the shareholders being from the U.S. I feel this does not allow for a company to grow as much because then they cannot try to expand overseas. I personally feel that following a C-Corp is better for a company because there are more opportunities available.
I am just adding to this statement as most of everything has been said about these two corporation types. I do feel that the benefits of being about to be publicly traded as well as having international partnerships in a C-Corp outweighs the downside of being taxed twice. It just makes more sense in the end.
Medtronic and Boston Scientific are c-corps because they are publicly traded companies with thousands of shareholders. S-corps are really tough to give an example because they are not created with the same goals of C-corps. C-corps experience a double tax and they can have thousands of shareholders while S-corps do not.
When deciding whether to form an S-corporation or a C-corporation, taxation isn't the only consideration. Although a C-corporation is subject to double taxation, the money is only taxed once for the firm and once for the shareholders. As a result, the tax that the firm pays is the same whether it is a C-corp or an S-corp. The other distinction is who is eligible to be a shareholder. S-corp firms have a lot more limitations on who may be a shareholder, which might limit their overall stock sales. This, I believe, is a greater disadvantage than having shareholders pay taxes, because it permits the firm to raise more funds when necessary by selling stock shares.
Due to the advantages and disadvantages of s-corporations and c-corporations there are suitable for different types companies depending upon their case. For instance, should someone create a corporation which is relatively small and simply does not have the capital to meet many markets, an s-corporation is a no brainer. The reason lies with how each type of company is taxed. S-corps receive quite a bit of lee way due to all of their shareholders being required to be US citizens. Additionally the taxes of s-corps pass over to the owners which may be beneficial. C-corps are more suited for larger companies due to there being to restrictions on the citizenship status of the owner or shareholders. There is also no restrictions on the number of shareholders the company can have as well. The drawback however, is that c-corps are taxed at the corporation rate which, in effect, is higher.
I fully agree that double taxation is a major disadvantage of a C-Corp and if we only looked at this aspect of a C-Corp, it would be easy to say that a C-corp is much better than an S-Corp. I think it is important to take into account the aspects of a C-Corp, and especially the disadvantages of an S-Corp, that make it relatively much better than an S-Corp. For example, with an S-Corp, all of the shareholders must be from the United States, the corporation can’t be publicly traded, and shareholders must be individuals. None of these restrictions are present in a C-Corp. Also, in a C-Corp, losses do not pass through to personal tax returns like they do in S-Corps. With all of these aspects taken into account, I think double taxation is not that bad in comparison.
When i think of a companies that are corporations, I never think of that corporation being specifically an "S-Corp" or a "C-Corp". I just think of them as a corporation, can you please provide an example of each type of corporation. Also give 1 or 2 reasons as two why you think each company choose to be either an "S-Corp" or a "C-Corp".
While there is only a one-letter difference between a S and C Corp, they do not exactly operate the same. Some of the biggest differences are the taxes, the formation, and the ownership. Some of the major similarities between the two are their limited liability protection, structure, formalities, and separate legal entities. S Corps are also known as small business corporations and elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. A C Corp is any publicly traded company that you would see on Wall Street such as Microsoft, Apple, or Walmart. I think S Corp chose this route because they are not taxed on a corporate level, and can file the business on their personal income tax return. A reason for a company to choose C Corp is that they are easy to form compared to an S Corp and that there are no restrictions on ownership.
There are many factors to consider before choosing whether to be an S-Corp or C-Corp. Corporations can generally be broken down into two categories: there are C corporations or regular corporations (i.e Johnson and Johnson) that are just referred to as corporations, and S corporations like Jack's Inc. in the state of Florida. A C corporation is treated separately from its owners in all respects including income taxes the shareholders are not liable for any debts of the corporation so the owners have liability protection. I initially didn't see why any company would willingly choose double taxation but now that I see the many benefits of expansion that come along with a C-Corp, I totally get it. As a C-Corp you are able to have shareholders from anywhere in the world, you can be publicly traded, and shareholders can even be other companies. I would like to know if anyone knows of any medical device companies that have chosen to form an S-Corp over a C-Corp?
@kc4310 I literally thought it was just me, I could only find one S-Corp in Florida that appears to be family owned. I couldn't initially see why any company would choose double taxation, but now I see that companies that are large enough to generate massive amounts of revenue can really only do so via the freedoms that C-Corps provide as far as global expansion.
A ‘S-Corp’ is a corporation that elects to pass corporate income, losses, deductions, and credits through their shareholders for federal tax purposes. A ‘C-Corp’ is a business structure in which the owners/shareholders are taxed separately from the entity, some examples are companies like Walmart or Microsoft. Both corporations are able to have unlimited possible owners and are run by managers. Ownership of the corporation is reliant on how much stock each shareholder owns so there is limited risk assumed by all owners. Some drawbacks to a ‘S-Corp’ is that all the shareholders must be from the United States, there can only be one class of stock and shareholders must be individual. While ‘C-Corps’ do not have the same drawbacks as ‘S-Corps’ a drawback would come from the taxation difference. For ‘S-Corps’, losses for the company can be passed through to personal tax returns while for ‘C-corps’ it cannot. Deciding between the both types of corporation, it would be more beneficial to be a ‘C-Corps’. This is because they are allowed to have owners from different countries, an unlimited number of shareholders, and different cases of stock which allows these companies to have a greater growth potential and more options for profit. ‘S-Corps’ are better suited for domestic businesses staying within the country.
An S corporation is a business structure that is permitted under the tax code to pass its taxable income, credits, deductions, and losses directly to its shareholders. The S corporation is available only to small businesses with 100 or fewer shareholders, and is an alternative to the limited liability company. The big advantage is the tax benefit and not having to pay federal taxes at the entity level. Other advantages of S corporations include being able to transfer interests or adjust property basis without facing adverse tax consequences or having to comply with complex accounting rules. A C corporation is a legal structure for a corporation in which the owners or shareholders are taxed separately from the entity. C corporations, the most prevalent of corporations, are also subject to corporate income taxation.
Certainly, I understand your perspective. When I think of corporations, I typically don't distinguish between S-Corps and C-Corps either, as they both operate under the broader "corporation" umbrella. However, for illustrative purposes, let's consider two hypothetical companies as examples:
One example of a C-Corporation could be a large technology company like Apple Inc. C-Corps like Apple often choose this structure because it allows them to raise capital through the issuance of various classes of stocks, making it easier to attract investors. Additionally, the limited liability protection afforded to shareholders is a significant advantage, as it shields their personal assets from company debts and liabilities, making it an attractive option for large enterprises.
On the other hand, a hypothetical S-Corporation could be a small, family-owned local restaurant. S-Corps might prefer this structure due to its pass-through taxation feature. Business income and losses pass through to the owners' personal tax returns, avoiding double taxation. This can be particularly beneficial for smaller businesses, and the reduced compliance and formalities make it a practical choice for businesses not looking to navigate the complexities associated with C-Corps.
So, although my initial thought aligns with yours in not specifically categorizing corporations as S-Corps or C-Corps, I can see why some companies, particularly larger ones, might prefer the C-Corp structure for its advantages in raising capital and protecting shareholder assets.
A C-corp is an example of a large company with thousands of employees and hundreds of shareholders, such as Amazon, Google, Apple, etc. S-Corp, on the other hand, are smaller businesses with fewer stockholders and employees. XYZ Inc. is a prime example of an S-corp. Taxation is one of the key distinctions between these two kinds of businesses. While losses in a C-corp do not flow through tax returns, losses in an S-corp are carried through to personal tax returns. Additionally, C-Corps are compelled to pay double taxes. The nationality of the company's stockholders is another important distinction between these two categories of companies. A C-corp allows shareholders and owners of any nationality, but all investors and corporate owners of an S-corp must be US citizens. C-corps have an edge over S-corps in this regard because they can draw investors from outside of America.
Hello,
An example of an S-Corporation is The Cheesecake Factory, Inc. S-Corps are known for their pass-through taxation, where profits and losses are reported on the personal tax returns of the company's shareholders. A company like The Cheesecake Factory, which is publicly traded and primarily in the restaurant industry, might choose S-Corp status to take advantage of pass-through taxation. This means that the business avoids the double taxation typical of C-Corps, where both the corporation and its shareholders are taxed separately. S-Corps are often favored by smaller, closely held companies to minimize the tax burden on their profits.
On the other hand, a well-known example of a C-Corporation is The Coca-Cola Company. C-Corps are the default structure for large, publicly traded entities due to their flexibility in issuing multiple classes of stock, which is essential for attracting a wide range of investors. A company like Coca-Cola, with a global presence and a vast number of shareholders, may choose to be a C-Corp for this reason. Additionally, C-Corps have the advantage of limited liability, shielding shareholders from the corporation's debts and legal issues, making them a suitable choice for companies of significant size and complexity, such as Coca-Cola.
In summary, the choice between S-Corporation and C-Corporation status often hinges on factors like taxation and the size and structure of the business. Smaller, closely held businesses may opt for S-Corp status to benefit from pass-through taxation, while large, publicly traded corporations like Coca-Cola may prefer C-Corp status to access capital markets and enjoy the advantages of limited liability.
