When is it best to use a C Corporation? It depends on your needs. Most business structures are flow through which means that income or losses from the business with end up on your personal tax return. There is no federal income tax that is paid at the business level.
C Corporation Benefits
In terms of federal tax, all entities except the C Corporation are flow through structures. This can be beneficial in a few ways if you know what your needs are. If your income is within the highest tax bracket you can actually move this income from the highest tax rate to a lower tax rate. For example, the first 50 thousand of taxable income is taxed at 15 percent. If you fall into the 35 percent tax bracket you will actually save 10 thousand dollars in taxes just from doing this one simple step.
More Deductible Items
The C Corporation also always many more owner and employee deductible items that would not be allowed within other types of business structure. Depending on your needs, the C Corporation may be right for you. It is best to consult with a CPA before making a kind of major tax decision.