What is the difference between a C-Corp and S-Corp?

A C-Corp is a standard corporation taxed at the 21% corporate rate with potential double taxation on dividends. An S-Corp is a tax election (not a separate entity type) that allows corporate profits to pass through to shareholders' personal returns, avoiding double taxation. S-Corps are limited to 100 shareholders, all of whom must be US citizens or residents.

Key differences: C-Corp can have unlimited shareholders of any nationality and multiple stock classes (common + preferred) — required for VC funding. S-Corp is limited to 100 shareholders who must be US citizens/residents, only one class of stock allowed, and cannot be owned by other corporations or LLCs. Tax comparison: C-Corp profits taxed at 21% + dividends taxed at 15-20% (double taxation). S-Corp profits pass through to shareholders and are taxed only once at individual rates (10-37%). S-Corp advantage: shareholders who are also employees can split income between salary (subject to payroll tax) and distributions (not subject to payroll tax), saving on self-employment taxes. C-Corp advantage: QSBS exclusion, retained earnings taxed at lower rate, no ownership restrictions.