Anchor Law Blog

Traditional corporations, particularly C corporations, were once the default option for business formation. But in most small and closely held business settings, they are now disfavored.

C corporations face what is often called “double taxation”: once at the corporate level when profits are earned, and again when monies are distributed to employees and shareholders. They are also subject to complex filing and maintenance requirements, corporate formalities, and shareholder rules that may not suit many small and medium private enterprises.

S corporations provide some relief by allowing pass-through taxation, but they come with strict eligibility rules, the violation of which can cause a corporation to lose S corporation status and face stiff tax consequences.

While corporations may still be useful in specific high-growth or public-capital contexts, Anchor Bay Law counsels most clients to avoid them unless there is a compelling business reason to take on the extra burden.