General Corporation (C/s-Corporation)

  • C-Corporation

    A general corporation, also known as a C corporation, is the most common corporate structure. A general corporation may have an unlimited number of stockholders. Consequently, it is usually chosen by companies planning to have more than 30 stockholders or large public stock offerings. Since a corporation is a separate legal entity, a stockholder's personal liability is usually limited to the amount of his or her investment in the corporation and no more.

    Vcorp Services can form your Incorporation in all 50 states as well as in Washington, D.C. If you have more questions regarding Incorporations, be sure to speak with a qualified legal and/or financial advisor.

  • S-Corporation

    A Subchapter S corporation is a general corporation that has elected a special tax status with the IRS after the corporation has been formed. S corporations are most appropriate for small business owners and entrepreneurs who prefer to be taxed as if they were still sole proprietors or partners. When a general corporation makes a profit, it pays a federal corporate income tax on the profit. If the company also declares a dividend, the stockholders must report the dividend as personal income and pay more taxes. S Corporations avoid this "double taxation" (once at the corporate level and again at the personal level) because all income or loss is reported only once on the personal tax returns of the stockholders. For many small businesses, the S Corporation offers the best of both worlds, combining the tax advantages of a sole proprietorship or partnership with the limited liability and enduring life of a corporate structure.

  • Restrictions

    To elect S corporation status, your corporation must meet specific guidelines.

    1. All stockholders must be citizens or permanent residents of the United States.
    2. The maximum number of stockholders for an S corporation is 75.
    3. If an S corporation is held by an "electing small business trust," then all beneficiaries of the trust must be individuals, estates or charitable organizations. Interests in the trust cannot be purchased.
    4. S corporations may only issue one class of stock.
    5. No more than 25 percent of the gross corporate income may be derived from passive income.
    6. Not all domestic general business corporations are eligible for S corporation status.

  • Exclusions

    • a financial institution that is a bank
    • an insurance company taxed under Subchapter L
    • a Domestic International Sales Corporation (DISC)
    • certain affiliated groups of corporations

    For more detailed information about these changes and other aspects regarding S Corporation status, seek the advice of an attorney, accountant or contact your local IRS office.