Is it better to register a start-up as a C or an S corp?

Is it better to register a start-up as a C or an S corp? by @R44D

Answer by Raad Ahmed:

It’s hard to say without knowing specifics on your startup. Generally,given the restrictions that come along with an S-Corp, a C-Corp offers a bit more flexibility when starting a business. A C-Corp is a standard corporation whereas an S-Corp has a special tax status assigned to it by the IRS. Both types of corporations offer limited liability protection, have similar structures, corporate formalities, and both are considered separate entities. However, despite their similarities, they have distinct differences.

C-Corps are separate taxable entities, and are subject to double taxation. Conversely, S-Corps are pass through entities, and pay no corporate income tax as a result as taxes are paid at the individual level. S-Corp restrictions include no more than 100 shareholders and they must be U.S. citizens or residents. They can also not be owned by other corporations, LLCs, or partnerships. Finally, S-Corps can only have one class of stock while a C-Corporation can have multiple classes. If you plan on scaling your business with the help of venture capitalists (VCs) and/or angel investors, and hope for an eventual IPO then a C-Corp is the way to go.

Still unsure which type of corporation you should form? Visit LawTrades where you can schedule a free consultation with an experienced startup attorney. Hope this helped!

Is it better to register a start-up as a C or an S corp?

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