Clarifying C Corporations

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At the very start of a business adventure, you may begin to wonder: what type of entity will my business be? When you look at it, there are so many options to consider.  There are partnerships, LLCs, LLPs, corporations, etc. If you decide to incorporate, then you also have to look at what type of corporation you would like to file as.  Meaning, are you going to be a C corporation, an S corporation or a B corporation? Then you have to think about how every state treats each of these corporations differently.  It’s a lot to think about.

However, if you are in the business of export tax, you are going to want to incorporate in order to benefit from the IC-DISC. Unlike most strategies used to save money on taxes which simply result in deferring taxes, an IC-DISC is used to provide permanent tax savings.

You may be wondering what are the similarities and differences between C & S Corporations and which one is the best for you. Below you will find ways they are similar and different and, if you decide to file as C Corporation, you will find instruction for filling out Form 1120

C Corporation

  • Corporations are taxed at a corporate and individual level
  • No limit on how many shareholders the corporation can have
  • Required to make estimated income payments
  • Owners and share holders do not have to be US citizens and are able to be owned by businesses

Similarities

  • Both receive limited liability protection
  • If the owner passes away or forfeits ownership, the corporation will still exist.  This is because the are considered separate entities.
  • Both C and S corporations require directors and officers
  • Annual shareholder meetings are required to be held and recorded

S Corporation

  • Corporations are only taxed at the individual level
  • S Corporations are limited to only having 100 shareholders
  • Required to make annual income tax payments
  • Owners and shareholders must be US citizens.  Businesses cannot be trusted shareholders

Sections of Form 1120 to Fill Out

  1. Basic Information – Name, Address, Employer Identification Number, Date of Incorporation, Total number of Assets.
  2. Corporation Income Information – Returns & Allowances, Gross Receipts or Sales, Total Cost of Goods, Dividends, Capital Gain and Gross Royalties and/or Rents
  3. Expenses Which Are Tax Deductible – Charitable Contributions, Employee Benefit Programs, Advertising, Repairs & Maintenance. Documentation does not need to be attached, but you should keep it for your records.
  4. Tax Refundable Credits & Payments – This sections is used to find out if you owe taxes to the IRS or if you will receive a refund.
  5. Schedule A – In this section you will calculate and input the cost of goods sold.  When deducting from the cost of goods sold, you must input your information here.
  6. Schedule C – If you have claimed dividends or special deductions, you must record that information in this section.
  7. Schedule E – In this section you will include any compensation of your corporate officers
  8. Schedules J & K – In this section you will show how accounting utilizes information that can affect your corporate tax rate.
  9. Schedules L, M-1, & M-2 – Here is where you will attach a balance sheet and document of reconciliation of income loss.  You will also analyze inappropriate retained money.

What Are the Advantages of a C Corporation?

C corporations are perfect for exporting.  In fact, if you are going to begin an IC-DISC with your export company, you are going to have to become a C corporation.  The difference here, is that when you start and IC-DISC, your corporation must be organized in the United States, maintain a separate bank account and have a minimum capitalization of $2,500. However, the tax benefits far outweigh any of the negative.  Check out our page on how to maximize your IC-DISC to find out more information.

Still Have Questions About Exporting?

Export tax Management exclusively offers international tax advisory services to U.S. businesses that have products or services delivered outside of the United States. ETM is the premier international tax advisory firm in the United States specializing in the IC-DISC. Our objectives are simple: To provide you with maximum export tax savings, while delivering unmatched personal attention by our staff of CPA’s.

Contact Export Tax Management today to learn how we can provide you with the maximum export tax savings.

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