Updated 27 March 2026

C Corp vs S Corp: Tax Comparison

C Corp pays 21% corporate tax then shareholders pay again on dividends (double taxation). S Corp passes income through at personal rates, saving 15.3% SE tax on distributions.

Worked Examples

$100,000 net business income

C Corp

Corporate tax$21,000 (21%)
After corp tax$79,000
Dividend tax$15,800 (20% qualified rate)
Total tax$36,800
Effective rate36.8%
Owner receives$63,200

S Corp

Reasonable salary$60,000
SE tax on salary$9,180 (15.3%)
Distribution (no SE tax)$40,000 (no SE tax)
Income tax$15,400 (24% on total)
Total tax$24,580
Effective rate24.6%
Owner receives$75,420

S Corp saves $12,220/year

$500,000 net business income

C Corp

Corporate tax$105,000 (21%)
After corp tax$395,000
Dividend tax$92,825 (23.8% including NIIT)
Total tax$197,825
Effective rate39.6%
Owner receives$302,175

S Corp

Reasonable salary$150,000
SE tax on salary$19,425 (capped at SS wage base)
Distribution (no SE tax)$350,000 (no SE tax)
Income tax$140,000 (35% bracket)
Total tax$159,425
Effective rate31.9%
Owner receives$340,575

S Corp saves $38,400/year

When C Corp Wins on Taxes

Retain all earnings for growth

C Corp

At 21%, the corporate rate is lower than most personal rates (24-37%). If you are reinvesting every dollar, C Corp lets you grow with lower initial taxation. The double taxation hits when you eventually distribute.

Pay yourself most of the profit

S Corp

Pass-through taxation avoids the double hit. You pay once at personal rates, and distributions above reasonable salary avoid 15.3% self-employment tax.

Planning to sell the business in 5+ years

C Corp (QSBS)

Qualified Small Business Stock (Section 1202) allows C Corp shareholders to exclude up to $10M in capital gains on stock held 5+ years. This is not available to S Corps. At high exits, QSBS saves millions.

Raising venture capital

C Corp (required)

VCs require C Corp structure for preferred stock, convertible notes, and clean cap tables. S Corps cannot have multiple stock classes or institutional investors.

Real estate income

Neither (LLC as partnership)

Real estate benefits from depreciation pass-through and tax-free property distributions, which work best in a partnership/LLC structure. S Corps restrict both.

C Corp vs S Corp OverviewWhich to Choose