The Pros & Cons
| The Pros | • No liability for non-active stockholders. • No restrictions on ownership. • Ownership can be transferred through the sale of stock. • Separate entity from stockholders. • Fringe benefits for owner-officers. • Can have ownership interest in any other business entity. • Perpetual existence. • Raising capital can be achieved by issuing stock. |
| The Cons | • Double taxation of profits. • Complex and expensive to create and maintain. • Require regular board of directors' meetings and minutes. • Requires a separate tax return. |
| Is a Good Fit | • Businesses with ownership in multiple other entities. • Businesses with significant exposure to liability. • Businesses intended to exists eternally. |
A Final Thought
It used to be that if you wanted to give yourself tax-advantaged fringe benefits, the best way to do that was through the use of a C-corporation. However, over the last decade the government has gradually increased the amount of benefit deductions that can be taken. For instance, for businesses that paid their taxes at the personal level you could only deduct 30% of what you paid in health insurance premiums. Today, you can deduct 100%. There have also been upgrades on the deductibility of some types of retirement plan premiums.
So one final factor you need to take into consideration when choosing which legal format to choose is what kind of perks do you want your corporation is pay to it's employees - including you. Are they the kind that only a C-corporation can provide, an S-corporation can provide or any of the business formats.
Plan not only for today, but your future as well.