3 Tax Advantages of C Corps over S Corps. . -- Kiritsis Law Firm Group 212 922 0005

Apr 27, 2021

Many articles have been written, berating the double tax feature of C Corps, while exalting the virtues of S Corps.  However, there are situations, when a C Corp may be more beneficial for taxes.

1. Flat 21% tax rate. Recent changes to U.S. tax system have brought the corporate tax rate to an almost record low of 21%, which is largely flat, irrespective of taxable income. This could be significant, because 21% may be lower than individual S Corp shareholders may be subject to, which can offset the double taxation disadvantage of C Corps.

2. Less reasonable compensation issues. IRS often scrutinizes, whether a corporation's shareholders get paid a reasonable compensation, along with its coffers receiving the corresponding self-employment tax payments. Such scrutiny is often less for C Corps than S Corps.

3. More able to take advantage of sophisticated tax strategies. Since, Corps is fully separate legal, economic and tax entities from their shareholders; they have an easier time to utilize legal maneuvers to exploit certain tax breaks of the U.S. tax code, by executing a number of sophisticated tax strategies.

 

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