Taxes : S-Corp or C-Corp . How different?

Dear Katie,

I heard people say that Mesh networks and and Star networks are different topologies. Could you explain this in more detail? Regards, Bill

P.S. S-corporations generally pay no income taxes. Income taxes are paid by the shareholders by each reporting his/her share of the corporations profits on his/her own tax return. Because they have already paid taxes on the S-corp's profits, when the S-corp distributes those profits to the shareholders they do NOT pay income taxes again. C-corporations pay income tax on their profits. Then when those profits are distributed as dividends, the shareholders pay income taxes again. Thus S-corp profits are taxes only once and C-corp profits are taxed twice.

The primary difference is that an S-corp is a passthough but a C-corp is its own tax entity. With an S-corp, the net profit flows through to the shareholders' tax returns and is taxed personally to them on their returns (regardless of whether or not they get any cash from the S-corp). The S-corp itself pays no taxes. A C-corp is its own tax entity. It files it own return and pays taxes on its net profit. Shareholders only pay taxes on dividends paid out by the C-corp. However, the C-corp gets no deduction for dividends paid, which means C-corp dividends are double-taxed.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

You heard correctly, there is a difference between S-corp and C corp taxes. The differences in taxation also impact other areas such as fringe benefits, liability issues, etc. You could google "s-corp vs c corp" and get a information in general but ... if you are considering changing to a different business tax structure you should definitely talk with a tax accountant about your particular situation.

Generally speaking: All profits of an S-corp are taxed at the owners' (stockholders') tax brackets on their 1040s whether distributed to them in cash or not. All profits of a C Corp are taxed to the corporation at corporate tax rates. If they are distributed they are taxed a second time as dividends on the stockholders' 1040. ed