Help Difference bet S-Corp and C-Corp

dayg

Senior member
Feb 20, 2001
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Hi All,

I'm thinking of starting out a consulting business. I'm currently working full time, but may soon consult for my firm part time and also part time with other firms. I spoke to 2 accountants, one suggested s corp, while the other suggested c corp. Couldn't fully understand the difference even after their explaination. But I do know that its easier to setup s-corp.

I work in the IT field in NYC. there won't be any partners as I'm the only one in my firm. Can some one tell me the major differences between the two? Also provide me some tips and/or experiences about starting out a new firm and how to handle paper works such as expenses and receipts.

TIA
 

DaveSimmons

Elite Member
Aug 12, 2001
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One difference is in taxes, the owners of an S-Corp pay taxes on any profits themselves (as well as on their salary), while in a C-Corp the company pays corporate taxes.

I just file a schedule C for my consulting, but incorporating could lessen your personal liability.

You should talk to the 2 accounts again and ask specifically about taxes and personal liability.
 

PsychoAndy

Lifer
Dec 31, 2000
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Call your accountant, he can tell you. there are a lot of idiosynchracies between each and someone in teh financial field should be able to find something that fits your needs\

i'm partial to subchapter s. in my state, less fees
 

dayg

Senior member
Feb 20, 2001
872
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DaveSimmons,

Thanks. I will call them again. You wouldn't have any informative links about this, would you? Thanks. Is Corp tax much less than individual income tax (W2)?
 

rahvin

Elite Member
Oct 10, 1999
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If you C-corp you will pay corporate taxes on any profits and then when you disburse those profits you will pay capital gains as a stock holder.

You want either S-Corp, LLC or sole prop., Ask your accountant to explain the differences because it does vary depending on the state you are in.
 

Frenchie

Moderator Emeritus<br>Elite Member
Oct 22, 1999
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What rahvin said.

With a C corp, the corp. pays taxes on its profit. Then whem it transfers the money to you (dividends on your stock in the corp), you have to pay taxes on that income. In other words the corp and you both pay taxes on the same money. AKA being double-taxed.
The S will act as a pass through. You personally (as opposed to the corp) pay taxes on the corporations profit. (single tax). The corp is treated more as an extention of the taxpayer than a seperate entity (for tax purposes). (Although the exact corp classifications do vary by state law).

 

rahvin

Elite Member
Oct 10, 1999
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Originally posted by: Frenchie
What rahvin said.

With a C corp, the corp. pays taxes on its profit. Then whem it transfers the money to you (dividends on your stock in the corp), you have to pay taxes on that income. In other words the corp and you both pay taxes on the same money. AKA being double-taxed.
The S will act as a pass through. You personally (as opposed to the corp) pay taxes on the corporations profit. (single tax). The corp is treated more as an extention of the taxpayer than a seperate entity (for tax purposes). (Although the exact corp classifications do vary by state law).

Whooo! I'm not an idiot. :) hehe Thanks for the validation Frenchy.