If choosing your business entity feels like a boring legal formality, think again. Your choice between an S Corporation and a C Corporation isn’t just about compliance—it can literally change how much money you keep. Like, tens-of-thousands-of-dollars-every-year kind of change.

Let’s walk through how both structures work, when each shines, and how Seed Financial helps clients pick the one that makes them richer—not just busier at tax time.

First, a Quick and Dirty Breakdown

S Corporation (S Corp)

• Pass-through entity: profits flow to the owner’s personal return.
• Avoids double taxation.
• Can split income into salary + distributions (aka self-employment tax hack).
• Limited to 100 shareholders (all U.S. persons).

C Corporation (C Corp)

• Separate tax-paying entity.
• Flat 21% federal corporate tax rate.
• Can retain earnings inside the company.
• Eligible for QSBS (Section 1202) stock exclusion.

The $150K Business Example (S Corp Wins)

Scenario: You own a solo consulting business making $150,000 in net profit annually.

As an LLC taxed as a sole proprietor:

• You pay self-employment tax (~15.3%) on the full $150K.
• That’s $22,950 straight to payroll taxes.

As an S Corp:

• You pay yourself a $70K reasonable salary (subject to self-employment tax).
• The other $80K comes to you as a distribution—not subject to SE tax.
• SE tax on salary = $10,710.
• Savings = $12,240 in payroll taxes alone.

👉 Seed Move: We help structure your salary to match industry standards, defendable to the IRS, while maximizing distribution-based savings.

The $1M Business Example (C Corp Shines)

Scenario: You’re reinvesting heavily, planning to scale, and paying yourself modestly.

As an S Corp:

• All profit flows through to you.
• If you're in a high tax bracket (37% federal + state), you could pay up to $400K+ in total tax on $1M profit.

As a C Corp:

• Company pays 21% tax on $1M = $210,000.
• You reinvest the remaining $790K to grow the business.
• No personal tax owed unless you issue dividends or take a salary.

👉 Seed Move: We advise high-growth founders when it’s time to switch to a C Corp to reduce personal tax exposure, defer income, and leverage advanced compensation plans.

So Which One’s Better?

S Corp Pros:

• Big savings on SE tax for active income.
• Simpler compliance and reporting.
• Great for solo operators and service businesses.

C Corp Pros:

• 21% flat tax rate—especially attractive if you’re reinvesting profits.
• Access to QSBS (exclude up to $10M in gains after 5 years).
• Fringe benefits like health insurance can be deducted more easily.

What’s the Catch?

• C Corps face double taxation if you take profits as dividends.
• S Corps can get messy with multiple owners or international shareholders.

Why You Need Strategy, Not Just a Signature

Entity choice isn’t permanent—but switching has tax consequences. That’s why Seed doesn’t just check boxes. We analyze:

• Your income goals
• Your reinvestment timeline
• Future exit plans
• Ownership structure

And then we map your business to the entity structure that makes the most money—not just the most sense.

Seed Financial: Entity structuring that pays for itself (and then some).