How do I decide if I should form a C “general stock” or Sub chapter S corporation?
Generally most people form C corporations that plan on publicly trading the corporation’s stock and intend to have 76 shareholders or more. A C corporation can have multiple classes of stock such as preferred and common shares. A C corporation will be double taxed since both the corporate entity and the individual owners have to file tax returns. For this reason alone, many will find S corporations desirable. However, an S corporation can only be owned by individuals that are U.S. citizens or registered aliens, issue only one type of stock, and is limited to no more then 75 shareholders. An S corporation eliminates double taxation as the corporation general does not file a tax return. On their tax returns, the S corporation’s shareholders include their share of the corporation’s separately stated items of income, deduction, loss, and credit, and their share of non-separately stated income or loss.
