Types of Corporations
A corporation is an independent legal entity distinct from its owners. Learn more about the different types of corporations and which one is right for you.2 min read
3. C Corporation (C Corps)
4. S Corporation (S Corps)
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Learn more about the types of Corporations below:
A corporation is an independent legal entity distinct from its owners. The law views a corporation as a distinct legal person that can enter into contracts, incur debt, and pay taxes apart from its owners. The owners of a corporation also have the benefit of having limited liability.
When most people refer to a corporation, they actually mean a “C Corporation,” but you can also form a special type of corporation called an “S Corporation.”
Both types of corporations have more in common than in opposition. Shareholders own both types of corporations. They elect a board of directors to oversee larger issues such as corporate goals, while elected officers handle more of the day-to-day business affairs.
A corporation is set-up to have shareholders own the business in a way that allows for limited liability to only the amount of money they put into the corporation. Corporations often have several business locations, adding more legal concepts to grapple with at the federal and state level.
Both have unique features that we have displayed below:
C Corporation (C Corps)
C Corps have more flexibility as well with shareholder rights and ownership, but typically face tougher tax implications because of this. This is due to a corporation’s ability to offer ownership shares in the business through stock offerings when a corporation goes public through an IPO (Initial Public Offering).
S Corporation (S Corps)
An S Corp is simply a corporation that has filed a document with the IRS to become a special type of corporation.
The main difference deals with taxation issues, but additionally, an S corporation only allows a specific amount of stock to be distributed.
Shareholders rights are much simpler here and double-taxation that occurs with a C corporation’s income is eliminated.
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