C Corp and S Corp at a glance
| Point | C Corp | S Corp |
|---|---|---|
| What the label means | A corporation taxed under Subchapter C by default. | An eligible corporation with a federal Subchapter S tax election. |
| Entity law | State corporate law governs the corporation. | The same state corporate law may govern; S status does not create a different state entity form. |
| Tax model | The corporation pays federal income tax, and distributions may have shareholder tax effects. | Items generally pass through to eligible shareholders, subject to detailed rules. |
| Eligibility | No S-election shareholder or stock-class limits. | Shareholder type, number, residency, and one-class-of-stock rules apply. |
| Check | Financing, distributions, losses, state taxes, exit, and qualified professional advice. | Election status, eligibility, payroll, basis, distributions, state recognition, and termination risks. |
Documents to put side by side
- The current draft or signed document for each option.
- Definitions, schedules, amendments, approvals, notices, and incorporated policies.
- A written business objective, timeline, cost model, and risk list.
- The primary source or professional advice that applies to the jurisdiction and facts.
Sources to verify
Use primary or authoritative sources to confirm current forms, filing instructions, agency rules, and legal definitions before acting on a general guide.
When professional help is useful
Use qualified advice before relying on a comparison for enforceability, tax treatment, worker status, privacy transfers, securities, regulated disclosures, litigation strategy, or a material transaction.
Before sharing records
- Keep originals in a controlled file and review a clearly dated working copy.
- Redact sensitive data unless the recipient is authorized and needs it.
- Label each document with its date, parties, version, jurisdiction, and status.
- Ask one focused question and identify the desired business outcome.