What are the differences between a C Corporation and an S Corporation?

Differences

Taxation  
There is a huge difference between C Corporations and S Corporations when it comes to taxation and S Corporations are normally formed because of this difference. In a C Corporation the company itself will be taxed and the shareholders will only pay tax on dividends. An S Corporations is very similar to an LLC, because profits and losses are passed directly to the shareholders and each shareholder will be taxed instead of the company. If you wish to turn your C Corporation into an S Corporation, you need to file the IRS Form 2553.  

Ownership limitations
Another major difference between a C Corporation and an S Corporation is that the S Corporation can have no more than 100 shareholders. It is also impossible for the S Corporation to have different classes of stocks; all stocks must be equal. A C Corporation can have both common and preferred stock classes and an unlimited number of shareholders.

So, why bother with different stock classes? Preferred stocks have priority over common stock when it comes to distribution of dividends and assets. It is on the other hand common for preferred stocks to be without voting rights and the owner of a stock without a voting right is not allowed to vote when the company is making decisions. It should be noted that some C Corporations have created preferred stocks where the stock do have a voting right when it comes unusual events of great importance, such as the issuing of new stocks or agreeing to an acquisition of the company.

Formation
Forming an S Corporation is fairly similar to forming a C Corporation, because both actions will require Articles of Incorporation, Stock Certificates, Stock Ledger, Bylaws and Organizational Board Resolutions. If you want to form an S Corporation you will however need an IRS & State S Corporation election as well.

Similarities

Limited liability
Both the S Corporation and the C Corporation offers limited liability for its shareholders. Generally speaking, neither of them warrants personal liability for shareholders. There are however exceptions to the general rules and it can therefore be a good idea to consult a lawyer or similar if you need more detailed information. Limited liability makes it possible to own a part of a company without being personally responsible for the actions of the company and acquired debts. You can form an S or C Corporation without having to risk your own personal assets, e.g. you family home.

Capital
Both the S corporation and the C Corporation will typically obtain their start-up capital by selling their stocks. By purchasing the stock, you become a shareholder in the company. As explained above, the S Corporation can only sell one type of stocks while the C Corporation can have common and preferred stocks.

Management and control
Both the S Corporation and the C Corporation are required to have a Board of Directors with overall management responsibility and Officers with day-to-day responsibility. This makes them very similar to each other and very different from the LLC.