S-Corp or C-Corp? What’s the Difference?

When you first form your corporation, it comes into existence as a C Corporation.  If you do nothing more, your corporation will remain a C Corporation.

 

A C Corporation becomes an S Corporation only when special tax treatment is sought by filing Form 2553 with the IRS.

http://www.irs.gov/pub/irs-pdf/f2553.pdf

Although a small business lawyer can advise you on the choice of entities, choosing whether to elect S Corporation status is best discussed with your accountant.  This is a tax decision, and a tax professional should review your entire financial picture before you make this decision.

New York State S Corporation Status

 

New York State also requires you file a form to be treated as an S Corporation under State Rules.  This form CT-6 Election by a Federal S Corporation to be Treated as a New York S Corporation.

 

http://www.tax.ny.gov/pdf/2007/fillin/corp/ct6_707_fill_in.pdf

New York City S Corporation Status

However, New York State does not exempt S Corporations from all NYS corporate taxes.  Again, you should check with your accountant prior to making this decision

Interestingly, New York City does not recognize S-Corp status at all. If your small business has income from New York City, you will need to pay New York City’s General Corporate Tax.

 

 http://www.nyc.gov/html/dof/html/business/business_tax_gct.shtml

 

 

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