Advantages of C corp

• Limited liability of shareholders
• Raise capital through stock offerings
• Shareholders come and go with ease
• No shareholder-level tax on undistributed income
• Section 1244 ordinary loss deduction for failed small business

• Double taxation
• Corporate level tax
• Distribution tax
• No capital gain rate differential
• All income taxed on same rate schedule
• Costly to start
• Tax traps
• Accumulated earnings tax
• Personal holding company tax
• Shareholders do not benefit from corporate rate losses
• Accrual method of accounting

• Tax free if following requirements met
• One or more people transfer property into corp
• Transfer is solely in exchange for stock

Transferor are in control of the corporation immediately after exchange

section 368(c)

• At least 80% of
• 1) total combined voting power of all classes of stock entitled to vote
• 2)total number of shares of all other classes of stock of the corporation

• Subject to federal income tax withholding
• Federal Insurance Contribution Act
• Social Security Tax
• Medicare Tax
• Federal Unemployment Tax Act

 (personal Holding company tax for C-corps with 5 or fewer owners)

• For a company that chooses to retain earnings rather than pay dividends
• Rate is 15% and will rise if top rate on dividends rise

• Limited liability
• Easily convert into C corp
• Corporate losses flow through
• Option of cash or accrual
• Not subject to self employment tax

• Cannot have more than one class of stock
• Shareholders owe section 1375 passive investment income

• Same as C corp
• Tax treatment on contributions of property
• LLC partnership is more flexible

• Pass through to shareholders
• Avoids double taxation
• Offset corporate losses 

• Shareholders do not get tax basis for S-corporation-level loans with lenders
• Restrictions placed on ownership of S-corp
• Generating passive investment income can subject S corp  to an entity-level tax

• Limited liability
• Varying classes of membership
• Allocate income and losses among members
• Losses flow through to members
• Tax-free distributions of appreciated property

• No section 1244

• Transfer of 50% or more of membership interests terminate LLC
• Disposition of interest can result in taxation at ordinary income rates

• Section 721
• No gain or loss recognized to partnership in the case of contributing property to partnership in exchange for interest
• Section 704(c)
• Precontribution gain or losses must be allocated to the contributing member of the asset

• If allocations have substantial economic effect
• Can allocate items of income, loss, deductions, or credit among members in manner that differs from ownership percentage