What is the difference of personal liability between S Corp and C Corp

UPDATED: Oct 1, 2022

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What is the difference of personal liability between S Corp and C Corp

I am starting a private therapy practice part time in La
Habra, California. I have ruled out as establishing as a
sole proprietor as I would like to protect my personal
assets from any future lawsuits. I am wondering what would
be the better choice establishing as S Corp or C Corp
since in California I am unable to establish as a LLC.
What kind of impact would it have on my taxes?
Additionally what type of licenses would I need to obtain?

Asked on November 12, 2017 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

There is no difference in liability protection between an S-Corp. and a C-Corp.: both are corporations, and both offer the same liability protection.
An S-corp. is a "disregarded" or "pass though entity": it is not taxed, but rather its profits or loses go to you (the owner's) income and are taxed only once, as your income, with any other income you have. A C-corp. has double taxation: any profits are taxed first at the corporate level (the corporation pays taxes), then, if and when the the owner takes money out (takes a distribution), those profits are taxed again as part of his or her income. Generally, a small business finds the S-corp. structure preferable.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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