Check Pricing
3-Step Process
Why LegalZoom?
Education Center
Incorporation Education
Why LegalZoom

Home | Business Formations | Incorporation


3. Two Types of Corporations

The IRS allows for a corporation to be taxed either as a "C corporation" or as an "S corporation."

C Corporations

A C corporation's profits are taxed at two levels. This is commonly referred to as double taxation. A C corporation pays a corporate tax on its corporate income (the first tax). Then, the C corporation distributes profits to shareholders who pay income tax on those dividends (the second tax).

Incorporate your business today

S Corporations

One way to avoid the double taxation of a C corporation is to make a special election with the IRS to be taxed as a S corporation, which is a pass-through entity taxed like a partnership or a sole proprietorship. That way, there is only one level of taxation. The corporate profits "pass through" to the owners, who pay taxes on the profits at their individual tax rates.

To learn more and to speak with a representative, please call us at (888) 381-8758.
LegalZoom Newsletter
Sign up for our free monthly newsletter and receive periodic special offers.
Choose Another Document