March 16th, 2008
S-corporation - Making The Election
Once you decide to form a corporation for your business entity, you will quickly be faced with another question. Should the corporation pay taxes as a “C” or “S” corporation?
There is a lot of confusion when it comes to the tax designation of a corporate entity. The first thing to understand is a corporation is a “C” designation by default. As a “C” entity, the corporation will file and pay its own taxes with profits and salaries being paid out to employees and shareholders. Since the employees and shareholders have to pay personal taxes on the distributions, “C” corporations are considered double taxation entities. This is generally viewed as a negative thing.