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Advantages and Disadvantages of S and C Corporations

From a tax and nontax perspective, what are the advantages and disadvantages of S corporation status versus regular C corporation status?

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Hello Student,

In order to answer this question, the first thing you need to do is define or look at the characteristics of each of these corporations. According to the Internal Revenue Service, for a firm to be considered as an S Corporation or gain S Corporation status it must be a domestic corporation; have only allowable shareholders (including individuals, certain trust, and estates and may not include partnerships, corporations or non-resident alien shareholders); have no more than 100 shareholders; have one class of stock; and not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.
A C Corporation on the other hand is considered as a corporation which is owned by shareholders, who must elect a board of directors who will make business decisions and oversee policies. For more information on each of these business structures you may note the following excerpts:

"S corporations are corporations that ...

Solution Summary

This solution first provides you with characteristics which define S and C Corporations. It then details the advantages and disadvantages of both from a tax and a non-tax perspective. References are provided.

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