C-Corp or S-Corp
We are a 2 member LLC, we are looking to change only our federal tax election status to either a C-corp or S-corp. Which form of Corporation would be better to switch to in regards to being taxed?
Thank you for your question. Unfortunately, we can’t really provide specific advice in your situation because the answer is based on individual circumstances. You may want to consult with a licensed tax professional who can review your situation and make a recommendation.
If you prefer to make the decision for yourself, we do have a few articles that high the different aspects of S-Corps & C-Corps which might help you decide. The first article you may want to check out is our guide to LLCs vs S-Corps vs C-Corps, which will highlight the differences between your current structure and either of your two options.
For most small business, C-Corps are typically overkill. If you have company profits from year-to-year, being taxed as a C-Corp will force you to pay taxes on profits twice – once at the company level and again at the individual level. While there are times when a C-Corp makes sense, you may want to look first at an S-Corp, which has limitations but is still taxed as a pass-through. For more information on S-Corps, be sure to check out our Ultimate Guide to S-Corps for taxes.
Good luck making your decision, and best wishes for continued success!