Business losses: The “S corporation advantage,” allows business owners to use business losses — like those incurred during the startup phase — on their personal tax returns as deductions.
Self-employment taxes: An S corp can provide savings on self-employment or Social Security/Medicare taxes, and it allows owners to offset non-business income with losses from the business — unlike a C corp which is a completely separate tax entity.
Ownership restrictions: Neither the LLC nor the C corporation have restrictions on the number of owners the business can have or who can be an owner. S corporations, however, have a number of restrictions. S corporations can have no more than 100 owners, and owners cannot be “non-resident aliens.” Additionally, S corporations can not be owned by C corporations, LLCs, other S corporations or non-qualified trusts.
Dividends and venture capitalists: C corps are often the preferred incorporation choice of developing businesses. Owners can hold different types of stock interests (including preferred and common stock), which allow for different levels of dividends. This is one reason why venture capitalists choose C corporations when they offer funding to a business. Investors are attracted to the prospect of dividends (often higher dividends) if the corporation makes a profit.
Earnings: C corps can retain and accumulate earnings (within reasonable limits) from year to year.