S Corp vs C Corp: A Tax Comparison

The S corp and C corp labels describe how a corporation is taxed, not a separate legal entity. The choice affects your tax bill every single year, so it deserves a close look.

A C corp pays tax at the corporate level and again on dividends, while an S corp passes income through to shareholders. Each has limits and planning considerations.

• C corps face double taxation on distributed profits
• S corps pass income through to shareholder returns
• S corps cap shareholders and restrict who can own
• Investors generally require the C corp structure

If you plan to raise venture capital, a C corp is usually required by the investors themselves. For closely held businesses, an S election can meaningfully lower taxes.