When starting a business or changing your business structure, one of the most common options small business owners evaluate is whether to form an S corporation (S corp) or C corporation (C corp). These are the two most common ways to incorporate online, and the choice really depends on your business goals.
S corporation vs. C corporation: The similarities
The C corporation is the standard corporation, while the S corporation has elected a special tax status with the IRS. It gets its name because it is defined in Subchapter S of the Internal Revenue Code. To elect S corporation status when forming a corporation, Form 2553 must be filed with the IRS and all S corporation guidelines met. But C corporations and S corporations share many qualities:
- Limited liability protection. Both offer limited liability protection, so shareholders (owners) are typically not personally responsible for business