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Benefit of a C Corp in California for a small business

Asked by: Anastasia  — 26 August, 2011

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: admin  — 26 August, 2011


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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