Tax Deductions: Even if your small business is quite profitable, a C Corporation is entitled to so many deductions that it may be possible for your company to have $50,000 or less in business income after deductions. For example, as the owner of a C Corporation, your salary and those of your employees are tax-deductible for the business. Corporations have other tax breaks, including:
Shareholders: Your C Corporation will include shareholders, and you can take the company public. You can also issue stock or stock options to employees.
Longevity: The board carries on the company, not the owner. That means that a corporation can last longer than an owner-based company such as an LLC.
Disadvantages of a C Corporation
Complexity: A C Corporation is complicated tax-wise and can be more difficult to create than a limited liability company or a sole proprietorship. You will certainly need financial, tax and business advisers to set up and maintain a C Corporation.
Double Taxation: If you want to issue dividends to shareholders from your corporation's profits, the corporation will pay taxes on the profits and your shareholders will pay personal taxes on the dividends. If your shareholders are employees, you might be able to tax-shelter additional profits by providing better benefits such as dental and eye care in addition to standard health insurance. You can also raise salaries and give bonuses, which the company can take as deductions.
