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What are the corporation tax types?

On Behalf of | Dec 8, 2017 | Business Formation & Planning

Florida state tax rules and federal regulations are equally important during any corporate structuring process, whether you are setting up a tax plan for a new company in the state, or modifying the structure of your existing business to prepare for a transitional phase. The process might seem complicated, but it often becomes easier when you make general choices first before focusing on the details. The choice between creating an S or C corporation is likely to be one of your fundamental decision points.

The FindLaw small business information database notes that C corporations make up the majority of publicly held enterprises in the USA. In fact, you might find, upon reviewing the information, the choice is already made for you. To qualify for S status, your business must conform to various rules, including:

  • Your shareholders must all be individuals, as opposed to other companies
  • You may have 100 or fewer shareholders
  • You may not have multiple stock tiers
  • You must be headquartered domestically

These somewhat restrictive criteria might lead you to question whether it is worth the trouble to attempt to obtain sub-S corp status. While the answer to that question varies from one enterprise to another, the fact is your S corporation would benefit from a single tax scheme, as opposed to the C corporation’s double taxation. Generally speaking, dividends paid on your C-corp stock would be taxable whereas S corporation dividends would not be subject to taxation.

It also bears mentioning that all your shareholders must agree to become a sub-S corporation before you file. Please consider this as educational content, not legal advice.