| A C Corp has the widest range of deductions and | | | | There are many things you can do to avoid the |
| expenses allowed by the IRS, especially in the area of | | | | double-taxation scenario. Structure the C Corp so that |
| employee fringe benefits. A C Corp can set up | | | | there are no profits left over -- use all of the write-offs |
| medical reimbursement and other employee benefits, | | | | and deductions allowed by the IRS to reduce the C |
| and deduct the costs of running these programs, | | | | Corp's net income. Offer great benefit plans! Pay |
| including all premiums paid. The employees, including | | | | higher salaries to yourself and the other owner |
| you as the owner/shareholder, will also not pay taxes | | | | employees than you would if you were using a |
| on the value of those benefits. This is not the case in a | | | | flow-through entity such as an S Corp. Yes, you will |
| flow-through entity, such as an S Corp, LLC or LP. In | | | | have to pay payroll taxes and personal income taxes |
| each of those cases the entity may write off the | | | | on those monies, but you would pay personal taxes on |
| costs of the benefits, but any employee/shareholder | | | | dividends paid to you anyway. And it may be that in |
| who owns more than 2% of the entity will pay taxes | | | | the big picture, the savings on one side outweigh the |
| on the value of their benefits received. So, if having the | | | | additional taxes paid on the other side. |
| maximum deductions and all of the employee fringe | | | | The decision as to what entity is best for you really |
| benefits on a tax-free basis is important to you, a C | | | | does, in so many cases, hinge on taxes, and that is |
| Corp may be your entity choice. | | | | why, with any corporate-related decision, you are wise |
| C corporations are great for a business that sells | | | | to seek the advice and assistance of a good CPA. |
| products, has a storefront and employees, and may or | | | | Some quick things to note on C Corps: |
| may not have a warehouse where it keeps its | | | | · They can have an unlimited amount of shareholders, |
| inventory. C Corps don't work well with businesses | | | | from anywhere in the world. |
| that want to hold appreciating assets, such as real | | | | · For Nevada and Wyoming corporations, officers |
| estate, because of the tax treatment on the sale of | | | | and directors can reside anywhere in the world; |
| these assets. | | | | · They can have several different classes of shares. |
| The most often-cited disadvantage of using a C Corp | | | | · They are the most widely recognized business |
| is the "double-taxation" issue. Double-taxation happens | | | | entity in the world, and are the premier entity for going |
| when a C Corp has a profit left over at the end of the | | | | public. |
| year and wants to distribute it to the shareholders as a | | | | In Nevada and Wyoming, nominee, or stand-in, officers |
| dividend. The C Corp has already paid taxes on that | | | | and directors can be utilized, adding extra levels of |
| profit, but once it distributes the profit to its | | | | privacy. |
| shareholders, those shareholders will have to declare | | | | While we like and often use S Corporations, we |
| the dividends they receive as income on their personal | | | | keenly appreciate that C Corporations have their merit |
| tax returns, and pay taxes again, at their own personal | | | | and place in your entity structure strategy. |
| rates. | | | | |