What is the difference between a sub s and a regular corp?

A sub-chapter S corporation is a flow through entity. This means that no tax is paid at the corporate level. All income passes directly to the shareholders as dividend income. The regular corporation, also known as a C corporation, pays individual income tax. If the corporation pays dividends to shareholders, the shareholders pay taxes on dividend income. The money is double taxed in a C corporation. Hearing this, many people would say why would anyone choose a C corporation? The reason is there are many disadvantages and restrictions that come with the S corporation election. You should consult with an experienced attorney to decide what is best in your particular case.

There are many differences, but the main difference is in relation to the tax treatment of the business. For a regular corporation (which is referred to as a C corporation), the income that the business receives is taxed at the corporate level at the corporate rate. Then, when the corporation pays its owners their salaries, that income is taxed to the owners at the personal level. This results in income essentially being taxed twice at two differently levels. With an S corporation, the business entity is viewed as a "pass through" entity. The S corporation is not taxed on its income, as the income is only taxed at the personal level to the owners who receive the "pass through" income. So, just as a basic example, let's say that the corporate tax rate is 15%, and the personal tax rate is 10%. The business makes $100,000, and $50,000 of that is paid to two owners as their salaries. In a C corporation, the business would pay 15% of the income it earned, which would equal $15,000 (15% of $100,000). The business's after tax profit would be $85,000. $50,000 of that is then paid to two owners ($25,000 each) for their salaries as shareholders in the C corporation. 10% (the personal tax rate for those individuals) of $50,000 is $5,000. So, between the corporate income tax and the personal income tax, a total of $20,000 was paid in taxes for the $100,000 in income. In an S corporation, the business does not pay anything on the income it earned, as it is a pass through entity. Even though only $50,000 is being paid to the owners, the income is automatically considered as having "passed through" to them due to the nature of the S corporation. Because the income was not taxed at the corporate level, it must be taxed at the personal level. Thus, the two shareholder owners pay 10% on the total earned $100,000, which is $10,000 in taxes. Usually, one pays less tax with an S corporation due to the income not being taxed twice as it is in a C corporation. However, C corporations can afford businesses more tax deductible fringe benefits, which may offset your taxable income. It would be best to speak with a tax attorney regarding your particular business model and what business entity would work best.

There are a lot of small differences. The primary difference between the two is that a C corporation pays income tax on its own income and an S corporation generally does not pay income taxes but allocates the taxable income to its shareholders who then pay tax on that income. S corporations also have limits on the number of shareholders (100) and the types of shareholders: no nonresident aliens and (with minor exceptions) no business entities.