All businesses in the U. S. must choose one of five IRS recognized structures for classification and regulation purposes. Corporations and S corporations are common choices because of their individual tax benefits. Both structures allow for the participation of shareholders and capital stock held by the corporation. But there are specific differences between the two structures that must be considered. In general, there are more strict regulations on what can be considered an S corporation and what is considered a C corporation.
For more information on which business structure is right for your business and how to implement that structure, please contact your Iowa business lawyers at LaMarca Law Group, P.C. by calling (515) 705-0233.
Differences in Corporate Structures
A corporation is recognized by the government as a separate taxpaying entity. Taxes will be filed for this entity much as they would be for a sole proprietorship. There are specific deductions that can be filed, but in general, the corporation is responsible for paying taxes on its gains and reporting its losses. This means that dividends that are paid to shareholders are also taxable separately as personal income.
An S corporation is structured based on a pass-through accounting system. This means that shareholders take on the gains and losses of the corporation in their personal taxes. To apply to be an S corporation, a company must meet certain requirements. They must be a domestic corporation with less than 100 shareholders which must either be individuals or certain types of estates and trusts. This type of business structure can only deal in one type of stock and excludes certain types of business operations.
Starting a new business is a complex engagement that often necessitates experienced legal advice. For more information on selecting a business structure for your company, contact your Iowa business lawyers at LaMarca Law Group, P.C. by calling (515) 705-0233.