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Ask HN: Should I form a C-Corp or an S-Corp?

1 points by leeleelee ↗ HN
I'm at the point where I need to form a legal business entity for a product I've been working on, and looking for a little advice. Here's a brief description of my situation:

- Enterprise SaaS, the goal is to turn this into a large company

- I am not aggressively pursuing investors, but don't want to rule out the possibility

- Currently it's a one-man-show (myself)

- I'd like to simply pay myself a "normal" salary and re-invest as much money as possible into the business

Downsides of a C-corp (from my understanding):

- More complex paperwork for setup and record keeping

- Double taxation on dividends (but not salaries?)

Upsides of a C-corp:

- More investor-friendly, and more flexibility with stock classes

What are the reasons to choose an S-corp? If I understand correctly, double taxation in a C-Corp wouldn't become an issue unless you have extremely large profits and want to take a large chunk of it out of the business, so much that you can't justify the amount as a salary and need to pay yourself a dividend. Or maybe if you have shareholders who are expecting to be paid dividends.

I am leaning towards forming a C-Corp.

Is there anyone who has been in a similar position who can share some advice?

2 comments

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eds2015
My advice is don't incorporate until you have no other choice. Depends on which state you're in and how much revenue you have (real, not projected), and whether some external event demands it. This is not legal advice, of course.
leeleelee
With enterprise sales, at least in my industry, I would never get through the corporate procurement process in order to become a vendor -- without being a legal business entity.