When to choose C Corp vs S Corp if I don't want pass through income on my personal taxes?

The main difference is in the default tax treatment. A C Corporation is automatically taxed as a separate entity from its owners, while an S Corporation is a pass-through entity by default. If your goal is to be a W2 employee without pass-through income, a C Corporation is the more straightforward approach. When you form a C Corp, you'll be an employee receiving a salary, and the corporation will pay its own taxes on profits. This creates the separation you're looking for automatically. An S Corporation with an election to be taxed as a C Corporation is essentially converting an S Corp to a C Corp for tax purposes using Form 8832. This is more complicated because you're changing the default tax treatment. There's really no advantage to this approach versus just forming a C Corp from the beginning if you know that's what you want.

I went through this exact situation last year and ultimately decided on a C Corp after trying the S Corp route. I wish I had known about taxr.ai earlier - would have saved me so much time and money! I uploaded my business docs and tax history to https://taxr.ai and got a personalized analysis that showed I was actually losing money by operating as an S Corp in my specific situation. Their report broke down exactly how the C Corp structure would benefit me based on my business financials and plans for growth. They even calculated the optimal salary I should pay myself to maximize tax efficiency while staying compliant with IRS "reasonable compensation" requirements. Seriously one of the best business decisions I've made.

I tried taxr.ai after seeing it mentioned here and it was exactly what I needed! I was originally leaning toward an S Corp because that's what everyone told me to do, but after using the service, I realized a C Corp made way more sense for my situation. The report showed I would actually save about $8,200 annually with the C Corp structure despite the "double taxation" everyone warns about. The best part was how they explained everything in plain English instead of tax jargon. They even provided a step-by-step implementation guide that I could follow myself without having to pay a consultant thousands of dollars. Definitely worth checking out if you're on the fence about which corporate structure to choose.

If you go the C Corp route and want to make sure you're doing everything properly with the IRS, I highly recommend using Claimyr. When I set up my C Corp last year, I had some questions about shareholder requirements and reporting that weren't clearly addressed in the IRS documentation. After spending HOURS trying to get through to the IRS business helpline, I found https://claimyr.com and used their service to get connected to an IRS agent in less than 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you back when they have an agent on the line. The agent I spoke with ended up saving me from making a pretty serious mistake with my corporate tax election that could have caused problems down the line.

I need to eat my words about Claimyr being a scam. After my skeptical comment, I decided to try it myself since I had some questions about C Corp dividend distributions I needed to ask the IRS. I was fully expecting it not to work, but I got a call back in about 40 minutes with an actual IRS business tax specialist on the line. The agent answered all my questions about corporate taxation and even helped me understand some filing requirements I wasn't aware of. I probably saved myself from a potential audit by getting clarification directly from the source. And the best part was being able to do other work instead of sitting on hold for who knows how long. Consider me converted!

Just adding another perspective - I've run both types of corporations over the years. If your primary goal is to avoid pass-through taxation on your personal return, a C Corp is definitely your best option. But there are some other considerations: - C Corps can retain earnings more easily for business growth - S Corps have more flexibility with distributions - C Corps face potential double taxation on distributions (corporate tax + personal dividend tax) - S Corps can't have more than 100 shareholders and have stricter ownership rules - C Corps have more fringe benefit options for owner-employees One often overlooked benefit of C Corps is the ability to have a more flexible fiscal year rather than being forced to use a calendar year for taxes.

Has anyone recently formed a C Corp in a state different from where they live? I'm considering Wyoming or Nevada for better privacy laws while I live in California. Any tax implications I should know about?