Incorporating in Florida – S and C Corporations

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Our experience incorporating in Florida has taught us that before converting into incorporation, entrepreneurs think and consider the pros and cons of S and C types of corporations. The C type is a standard corporation, while the S corporation has a special tax status. C corporations in Florida have supportive laws with tax benefits.

Similarities

  1. Community rules and regulations:  Both S and C corporations are required to follow all the formalities and paperwork. This includes issuing stocks, making annual reports, hold meetings and so on.
  2. Separate entities: Both types are recognized legally and are required to fill their existence with the law so they are identifiable through credible sources. This means that these ventures will not be known by their owners or shareholders. They will be identified as a separate existence under the law.
  3. Limited Liability: Separate entity gives both types the advantage of following the business structure of a limited liability company. Shareholders, or in simple terms, the owners of the venture are not responsible for the liabilities and business debts undertaken by the business.
  4. Structures: The corporate structures of S and C corporations are very similar. Both have directors, shareholders, officers etc. to oversee the execution of the business goals and objectives. This similarity maybe identified by the process which creates corporations. Businesses are brought on board of corporations by filling a certificate of incorporation, or what is termed as articles of incorporation.
  5. Life: Corporations live as long as they have sufficient funds. This goes for S and C, both.

Florida

Incorporating in Florida is handled by a separate department. The state of Florida has its own website where you can fill in the online form for the incorporation of your business.  The state’s division handling corporations stands on top because it has the most active filling process in the entire country. Two business days is the maximum they take.

The clutter of small and medium enterprises is now turning into a separate kind of company demographic in Orlando. Medium enterprises are slowly and gradually moving towards incorporation. This is an indicator that the state will have a very big base of large sized companies. This would allow small enterprises to grow to medium, leaving more opportunity for new start ups in the city.

Starting a business in Orlando Florida and turning it into a corporation is every entrepreneurs dream. However, it is best to decide what type of corporation you want your business to be at the early stages so that you may carry your organization forward accordingly.

Differences between S and C Corporations

Forming Your Business in Florida

Florida is full of opportunities for entrepreneurs, small business owners, and incorporations. For small organizations, incorporating in Florida brings forward a lot of opportunities like a tax climate which is supportive of growth. While growing, there are two options that an owner has when he or she chooses incorporation as a business structure. The business can either grow to become an S corporation or a C corporation.

Differences between S and C Corporations

  1. Taxation
  2. Taxed as separate entities, it is mandatory for C corporations to report all the profits and losses incurred. Shareholders of this entity are taxed separately on the income that is paid by the C Corporation. So we have a disadvantage there. C corporations are taxed twice.

    On the other hand, S corporations do not face double taxation.  These corporations do not have to pay any taxes on their profits, rather the shareholders have to pay income tax individually.

  3. Employee Benefits
  4. Employee benefits for S corporations are a little more generous as compared to C corporations. Although both types are allowed to pay employee benefits on the cost of the company, but the tax free status of the S corporation enables it to pay out a little more on financial benefits. So an S corporation is given more preference over C Corporation while choosing to incorporate in Florida.

  5. Ownership of stock
  6. An American by passport or a resident in United States will be the only one eligible to buy stocks of an S corporation. On the other hand, C corporation stocks can be sold out to anyone anywhere in the world. Voting rights between the two corporations also differ.

  7. Business Activity
  8. While C corporations are allowed any kind of business activity as long as it is legal, S corporations have a limit on the business activity they can perform. For example, insurance companies and banks that are taxed under some laws will not be allowed to become S corporations. Banking and insurance cannot run as S corporation in Florida.

  9. Buildup of Capital

Since C corporations are bound to pay corporate taxes, their capital buildup will be slower than that of S corporations. Assuming that one S corporation and one C corporation are standing at equal, and give out an equal dividend, S corporation will have more capital in terms of cash in hand and current assets because they will not be liable to pay corporate taxes. This means that S corporation will have a better liquidity position. S corporations in Florida are more likely to grow because they can reinvest the money they save from corporate taxes.

A single difference might be giving one advantage to a C corporation while another difference might be of use to an S corporation. Generally, S corporations are a better off as long as taxes are concerned. This, in general, gives an S corporation a better chance to grow.

If you need more information about our business development services, please contact us at 407-344-1228. FreedomSBS is a marketing, graphic & web design, accounting, internet marketing, business development, and corporate law resource firm all in one! FreedomSBS is your one stop shop to start, grow and mature your business.  Our services include: incorporation services, graphic design, logo design, web design, web development, internet marketing, search engine optimization (SEO), marketing consultations and corporate law resources.  Our services are provided nationwide, but since our main office is located in Kissimmee, FL, we mainly help businesses in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, and Hunters Creek, FL.