Types of corporations (Tax view)

Two Types of Corporations

The IRS allows for a corporation to be taxed either as a "C corporation" or as an "S corporation."

C Corporations

A C corporation is taxed at two levels. This is commonly referred to as double taxation. A C corporation pays a corporate tax on its corporate income (the first tax). Then, the C corporation distributes profits to stockholders who pay income tax on those dividends (the second tax).



S Corporations

One way to avoid the double taxation of a C corporation is to make a special election to be taxed as a S corporation, which is pass-through entity taxed like a partnership or a sole proprietorship. That way, there is only one level of taxation. The corporate profits "pass through" to the owners, who pay taxes on the profits at their individual tax rates.

source: http://www.legalzoom.com/incorporation-guide/types-of-corporations.html