S Corporation, C-Corporation Versus LLC Tax Comparison

All corporations are created as C corporations. If the shareholders meet certain criteria they can choose to become an S corporation, and avoid the double-taxation of the C corporation.


Important things to know

  • The “tax statuses” are defined by federal law but corporations and LLCs are formed by state governments, each of whom have their own laws and regulations.
  • Many states require a separate filing to get S status in that state
  • Changing tax status is a one-time thing to do. It is very expensive to reverse a change.
  • Some deductions available to C corporations are not available to S corporations
  • S corporations cannot be a subsidiary of another company
  • S corporations can only have one class of shares
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