LLC Vs S-corp: What Are They And How Are They Different?

Some states charge a franchise tax or other taxes for any corporations that reside or operate within state lines. S corps in North Carolina, for example, must pay $200 if they have a tax base of $1 million and an additional $1.50 for each $1,000 earned above that. California requires S corps to pay an annual tax of 1.5% or $800, whichever is greater.

As a former small business owner who has worked with organizations of all sizes, from mom-and-pop through Fortune 10, Kristin focuses on technology and financial solutions that work for your business and enable you to grow. The way you structure your business is a big decision and has big implications for your business’s future. If you don’t feel sure about choosing your business entity or correctly structuring your company, consider talking to a small business lawyer or accountant. Let’s look at another example to understand what business taxes may look like for S-corps vs. C-corps. No, S corporations do not have to use accrual accounting, unless they have inventory.

How to elect S-corporation status

It is a separate body from its owners with its own assets, liabilities, obligations, and rights. A corporation is a business entity formed under the laws of a corporation statute of a state. It has an existence separate and apart from its shareholder or shareholders. S corporations (S corps) are a common entity choice for small businesses. Whether you’ve been operating for a while or you’re just getting started, it’s good to brush up on some basics.

Sumitomo Corporation has been involved in a wide range of areas in the automotive industry both in Japan and overseas. In Asia, in December 2023, Sumitomo Corporation established a new company, PT. SMAS Mobility Indonesia in Indonesia, which is mainly engaged in the automobile rental business and fleet management services. In March 2024, we concluded a memorandum of understanding with Green and Smart Mobility Joint Stock Company, which operates EV cab and EV rental businesses in Vietnam, to consider collaboration in the mobility business.

Tax and accounting regions

Define your business goals and then find out if a C corp or S corp is right for you by consulting a tax professional. A corporation can issue multiple classes of stock to its shareholders. In turn, its shareholders can freely retain what is an s-corporation (s-corp)? or sell those shares at will. There are few restrictions on who a C corporation’s shareholders can be or how many shareholders a C corp can have. Some corporations, for example, can invest in a C corporation but not an S corporation.

A C-corp is subject to corporate tax rates and has no restrictions on ownership. An S-corp is a pass-through entity that reports its profits on the owners’ personal taxes, and ownership is restricted to up to 100 shareholders. The exact steps required when electing S-corporation status will depend on whether you have already formed a corporation or LLC. If you have not yet registered your business, check out our more specific guide on forming an LLC. The guide below outlines the most common steps to electing S-corp status as either an LLC or a C-corp, but you should always do research into the specific requirements of your jurisdiction. You can contact the agency that regulates income taxes in your state for more detailed information on any requirements of S-corp election.