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An overview of two common types of corporate structures

On Behalf of | Dec 17, 2020 | Business Formation |

When a person in Omaha is starting a business, they will have to choose a business structure. Some may decide that incorporating is the best structure for their business. The following is a brief overview of two types of corporations that may be worth considering.

C corps

C corporations are what many people think of when they think of a corporation. A C corp has the advantage of being a separate legal entity from its owners. That means the owners are not personally liable for the actions, obligations and debts of the corporation. If a stockholder leaves the corporation or sells their shares in the company, the corporation continues to run as it always has. Corporations can make a profit, and they can be taxed at the time the initial profit is made and then once more when dividends are paid to stockholders on their income tax returns.

S corps

S corporations are designed to avoid being taxed twice, as a traditional C corp would be. In an S corp, profits (and sometimes losses) go directly to the stockholders’ personal income and are not subject to corporate taxes. State law varies on S corps, and in order to form an S corp, the company must file with the Internal Revenue Service (IRS). S corps cannot have over 100 stockholders, and all stockholders are required to be citizens of the United States. Like C corps, if a stockholder leaves the corporation or sells their shares in the company, the S corp continues to run as it always has.

Seek help if you want to form a corporation

C corps and S corps are only two types of corporations. Other types of corporations such as B corps, close corporations and nonprofit corporations may be worth considering. Attorneys in Omaha can provide further information about the legal processes of business formation.