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Benefit of a C Corp in California for a small business

Asked by: Anastasia - 26 August, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/default.png-f1597c1da25f30f8c1a941405e8391c8 What is the benefit of a C Corp over a LLC or S Corp for a business that breaks even each year, tax/financial planning company? There is a health insurance deduction, but there are only 2 other participant employees that are not the family members or owners of the business, so how does the C Corp save this company on taxes? Is it best to switch to an S Corp or LLC? It seems unneccesary to run as a C Corp right now. Please advise.
Answered by: Alec Green - 29 August, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/2.jpg-d85fc946de818bb769fdd6ce8cd95478 Anastasia,

I would strongly recommend to consult a California-based accountant, since you would need someone who is familiar with this state rules to help you figure out those questions.

I can only tell you that C-Corporation can only be elected as S-Corporation if all shareholders are US-persons, and if there are 100 or less of them. Also, keep in mind that Corporations are taxes in California based on net income (1.5% for S-Corporations and 8.84% for C-Corporations, as of today) while LLCs are taxed based on gross income, so if you break even you should probably stick to a Corporation (or LLC elected to be taxed as Corporation).

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