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What are C and S corporations?

As a Georgian business owner, you will need to be prepared to deal with U.S. federal income taxes. In order to figure out how to handle taxes for your business, you will also need to figure out which class of corporation your business falls under.

The Internal Revenue Service states that there are both S corporations and C corporations, which both have different corporate law regarding taxes. While S corporations are taxed together with its owners, C corporations are taxed separately and considered their own entity. Both small businesses and large conglomerations tend to be treated as C corporations when it comes to determining income taxes. As long as a company is for-profit, it will automatically be considered a C corporation.

You can decide to become an S corporation instead, if you would like. However, qualifying as a C corporation is much easier. Elections for S corporations also require that either a resident or citizen holds the shares. There are no limits on your shareholders either within the country or outside of it, which is not the case with S corporations. This can make it a bit easier for you to move around in regard to financial aspects of your business.

Ultimately the decision is up to you. You will need to survey your own business and speak with any partners to determine which federal tax set up will bring the greatest benefit to your company with the fewest numbers of hurdles to jump, and work toward your goal from there.

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