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What is the difference between Florida C corporations and Florida S corporations?
Some of the differences between Florida C corporations and Florida S corporations are:
1. Taxation: Many Florida State corporations elect to become a Florida S corporation because it combines the advantages of sole proprietorships and partnerships with corporate structures. A Florida S corporation must file IRS form 2553 to elect a special tax status, which allows it to be taxed as a "pass-through entity," which means that shareholders reflect the corporation's gains or losses on their personal income tax return. The election must be made by March 15 in order to take effect for that year. If the election is made after March 15 but within 75 days of the incorporation date, the election will be effective for the next calendar year. If the Florida S Corporation is not a calendar year taxpayer, the election must be made within 75 days of the beginning of the corporation's tax year.
A Florida C corporation is a separately taxable entity. In other words, a C corporation must pay taxes on its income and an individual must pay taxes on the dividends she receives. This can lead to 'double taxation' on dividends that are paid out of corporate profits to the owners. The avoidance of double taxation is the greatest benefit of becoming a Florida S Corporation.
2. Restricted Ownership: The ownership of a Florida S corporation is subject to certain restrictions. A Florida S corporation can have no more than 75 shareholders, can not have any non-US resident shareholders and cannot be owned by C corporations, other S corporations, many trusts, LLCs or partnerships. In addition, Florida S Corporations are not allowed to own eighty percent or more of another corporation's shares.
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