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Re-evaluating S and C corporation benefits

Like their counterparts around the nation, business owners, entreprenuers and executives in Michigan and Illinois are likely very interested to learn how the new tax plan might change some of the decisions they make about their ventures. One of these key decisions often faced is whether to establish a business as a traditional C corporation or as an S corporation.

As explained by Inc. magazine, many small businesses in particular have historically been able to benefit from an S corporation structure over a C corporation structure largely due to the difference in taxation and the high tax rate associated with C corporations. Now that this tax rate will be cut dramatically, it might be time for people to re-evaluate the type of structure used.

Even with some tax reductions targeted at S Corporations, some of these businesses might be better served by converting to C corporations. Others just getting started might do well to establish themselves as C corporations from the beginning. It is important to note, however, that C corporations will still be subject to double taxation even though the corporate tax level will be reduced.

Forbes urges businesses to use caution when making the decision about a business structure as taxes are not the only issue to consider in this matter. There are material differences in how companies are managed, who can make decisions and who can even own stock between C corporations and S corporations. Even the type of fringe benefits allowed vary between these two types of business structures.