What are the differences between C and S corporations?
The Internal Revenue Code allows for two different levels of corporate tax treatment. Subchapters C and S of the code define the rules for applying corporate taxes. Subchapter C corporations include most large, publicly-held businesses. These corporations face double taxation on their profits if they pay dividends: C corporations file their own tax returns and pay taxes on profits before paying dividends to shareholders, which are subsequently taxed on the shareholders’ individual returns. Subchapter S corporations meet certain requirements that allow the business to insulate shareholders from corporate debts but avoid the double taxation imposed by subchapter C. To receive subchapter S treatment, corporations: Must be domestic; Must not be affiliated with a larger corporate group; Must have no more than one hundred shareholders; Must have only one class of stock; Must not have any corporate or partnership shareholders; and Must not have any nonresident alien shareholders. Additionally
