| A Corporation is formed by filing with the state a standard
"Article of Incorporation." As a shareholder in a corporation
whether it is "C" or "S," one does not have personal
liabilities that arise from a business transaction.
The "C" Corp has been a basic corporation model
practiced even before Civil War. Income the corporation makes is
taxed at the corporate tax rate. Income may be distributed to shares
holders. The shareholders are taxed again. This is often referred
to as double taxation.
The "S" Corporation reports any earned income
at the end of the fiscal year. This flows to the individual shareholders'
1040 tax return. The income cannot be kept as accrued on the balance
sheet as cash. The smallest corporations today are the "S"
corporations and just like their big sister C Corporation, they
follow the same type of reporting system.
The major difference between "C" & "S"
corporations is that "C" is taxed twice and "S"
is taxed once.
For more information, please consult an attorney or financial advisor.
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