Ribadeneira Law Offices

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Corporation

A Corporation can offer tax advantages to certain companies as well as liability protection. Most Corporations are set up as a “C” Corporation or an “S” Corporation. A C-Corporation enables the entity to retain earnings at an initially lower tax bracket which may be a benefit to an entity which is looking to expand its business. However, when dividends are distributed to the shareholders, the shareholders must pay tax on such dividends thereby creating a “double-taxation”: the entity is taxed at the corporate level first then the shareholders are taxed at their tax rates. An S-Corporation avoids the double taxation issue by passing all income (and losses) generated to the shareholders each year. A Corporation must file a separate tax return each year and must comply with corporate formalities (meetings by directors and shareholders, filing of annual reports) to insure limited liability to the shareholders.