If you have a business concept in mind and you’re considering incorporating your business around it, then you’re probably keenly aware that there isn’t just one type of corporate structure that you can choose from. There are instead many different ones. Each has its inherent pros and cons associated with it. If you’ve considered setting up either an “S” or a “C” corporation, then you probably should first know the difference between the two before you move forward it incorporating your business as one of them.
One of the clearest differences between an “S” and a “C” corporation is how each is taxed.
A “C” corporation pays taxes on the income it generates. The business owners also pay income taxes on the income that they receive as the person who runs the business or is employed by it.
“C” corporations do enjoy many tax benefits. They can generally claim a deduction for 100% of their charitable contributions and donations. These can’t exceed more than 10% of their income though.
The taxes that a “C” corporation may be assessed are also capped at 21%. These corporations generally qualify for additional tax deductions based on the benefits that they offer their employees including health insurance.
“S” corporations don’t generally file a business return. The owners do report the company’s profits and losses on their personal income tax return though. They can generally claim up to 20% of the corporation’s business income as a deduction on their personal tax returns.
These two types of corporations also have different ownership requirements. There aren’t any limits as to how many people can own “C” corporations. There can’t be any more than 100 shareholders who own “S” corporations though. The owners of the latter must all be U.S. citizens.
Making sense of the pros and cons associated with different corporate structures can be difficult. An attorney will want to spend time learning more about your North Canton business idea before advising you about the Ohio corporate structure that is best suited for your concept.