When starting a new business in Idaho or changing your Idaho business structure, the most common option is an Idaho S corporation or C corporation.
Idaho S corporation vs. Idaho C corporation: The similarities
The Idaho C corporation is the standard corporation, while the S corporation has elected a special tax status with the IRS and state.
Idaho C corporations and Idaho S corporations: The Similarities
- Idaho Limited liability protection. Both offer limited liability protection, so shareholders are not personally responsible for business debts and liabilities.
- Separate entities. Both the Idaho S corporation and Idaho C corporation are separate legal entities created by a state filing.
- Filing documents. Formation documents must be filed with the state of Idaho. These documents, typically called the Articles of Incorporation or Certificate of Incorporation, are the same for both the Idaho C and Idaho S corporations.
- Structure. Both have shareholders, directors, and officers.
- Idaho Corporate formalities. Both are required to follow the same internal and external corporate formalities and obligations, such as adopting bylaws, issuing stock, holding shareholder and director meetings, filing annual reports, and paying annual fees.
Idaho S corporation vs. C corporation: The differences
Taxation is often considered the most significant difference between Idaho S corporations and Idaho C corporations.
- Idaho C corporations
Idaho C corporations are separately taxable entities. They file a corporate tax return (Form 1120) and pay taxes at the corporate level.
- Idaho S corporations
S corporation is pass-through tax entities. They file a federal informational return (Form the 1120S), but no income tax is paid at the corporate level. The profits/losses of the business are instead “passed-through” the business and reported on the owners’ tax returns.
- Personal Income Taxes
With both types of Idaho corporations, personal income tax is due both on any salary drawn from the corporation and any dividends.
- Corporate ownership
Idaho C corporations have no restrictions on ownership, but S corporations are regulated. Idaho S corporations are restricted to no more than 100 Idaho shareholders, and shareholders must be US citizens/residents.