How do “C” Corporations differ from “S” Corporations?
Some startup companies benefit by starting out as an S corporation, while others remain as C corporations because the owners desire to deduct 100% of medical expenses, the corporation fails to qualify for S corporation status, or the shareholders desire to have the opportunity to exclude from gross income 50% of the gain from the sale of “qualified small business stock” (explained below). Generally, a corporation fails to qualify for S corporation status if one or more of the following situations apply: 1) ANY owner of the company is another business entity or a nonresident alien (a person is a nonresident alien if he or she is neither a resident nor a citizen of the United States). 2) The company will be owned by more than 75 persons. 3) The company plans to issue more than one CLASS of stock (for example, special allocations of profits and losses will be made that are not proportionate to the equity percentage of each owner). If the above situations do not apply to you, then the corp
