C Corp vs S Corp: Which to Choose

Pay yourself $80K salary, take $70K as distributions. Save ~$10,700 in self-employment tax annually. The accounting cost ($1,500-$3,000/year for payroll + corporate return) is offset by the tax savings.

VCs require C Corp structure for preferred stock classes, convertible notes, and clean cap tables. S Corps cannot have preferred shares or institutional investors. Plus QSBS can exclude $10M+ in capital gains at exit.

Pass-through taxation eliminates double taxation on distributions. Each partner pays only personal income tax. Self-employment tax savings compound across multiple owners.

S Corp for tax efficiency while small. If you plan to raise outside capital, convert to C Corp when needed. The conversion has tax implications but is straightforward.

The 21% corporate rate is lower than most personal rates (24-37%). If you are reinvesting profits rather than distributing them, C Corp lets you grow with a lower tax burden. But eventually those earnings are taxed again when distributed.

S Corps cannot have special allocations of income, cannot distribute property tax-free, and real estate depreciation pass-through is better handled by a partnership. Consult a CPA, but S Corp is rarely ideal for real estate.

The accounting costs ($1,500-$3,000/year) eat most of the S Corp tax savings at this income level. Stay as a sole proprietor until net income consistently exceeds $50K-$60K.