C-Corp Status: A Killer When You Sell

C-corporation status offers few benefits but substantial drawbacks for the typical private-business owner. Why haven't you switched to an S or LLC? It's cheap and easy. Just file a form with the IRS. Talk to your financial advisor and if he or she agrees, get it done.

Of course, the problem with C-corporations is double taxation. This can hit you when you own the business, but the real killer is when you want to sell it. Buyers want to buy your assets, not your stock. That means you pay tax on the proceeds within your company and then again when you distribute the cash to yourself. That hurts.

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This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2010.

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