Think a C Corporation Is the Entity Choice for Conducting a Business? Think Again
C corporations, like flying, were once a choice of last resort. The aversion of most taxpayers to doing business as a C corporation was attributable to the possibility of suffering a fate worse than death: DOUBLE TAXATION.
Double taxation is the hallmark of the subchapter C regime. Unique in the tax world, C corporations are first taxed on their income at the entity level. Then, when the business owner withdraws the income, the owner is taxed on the income a second time as a dividend. Under current law, the top rate on corporate income is 35%; meanwhile, the top rate on dividend income is 23.8%. As you might imagine, this can lead to painful consequences when doing business as a C corporation.
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Authored by Tony Nitti, Withum Partner and writer for Forbes.com.
