Overall, LLCs might prove a cheaper, more versatile format. They can sue and be sued, borrow money, lose money or, one hopes, make a fortune. And they can live forever, a life legally separate from those who founded them. C corps uses the C subsection of the Federal Tax Code-hence the name. The corporation files Form 1020 and makes quarterly tax payments, in addition to regular payroll withholding.
Employees report compensation and dividends as personal income.
In practice, you can pay yourself a sufficiently large salary to offset any corporate profits. Furthermore, you can care- fully allocate profits as retained earnings, shareholder dividends and salaries to minimize your tax bite. Profits kept in the business get taxed at lower corporate rates. Dividends paid to share holders get taxed twice. Losses can offset past or future profitable years.