S Corp, C Corp: A World of Difference
A few points to add to the discussion in "Room to Grow" (Aug./Sept. 2007): Health-insurance premiums paid by an S corporation for an employee owning more than 2% of the stock may be considered taxable compensation to the employee.
S corporations must file on a calendar year. C corporations may use another fiscal year, which is a tool that can be utilized to postpone paying taxes. Also, because S corp losses are passed through to the stockholders' individual tax returns, losses incurred by a startup S corp can be used to offset other income and in some cases recoup income taxes paid in prior years. Finally, although the LLC itself is not a taxable entity, LLC owners are generally taxed personally on the net profit of the company, regardless of whether any cash distributions are made.
Gary Abeles, CPA
Tipping Point Technologies