"The C-Corporation pays its own taxes. The S-Corporation assigns corporate profit (or loss) to its owners on the basis of percentage ownership, somewhat similar to the manner of a Partnership. In the C-Corporation, losses can be carried back (or forward) to other years, thereby somewhat leveling the tax burden over time. In the S-Corporation, income or losses are fully assigned to shareholders who take them on their personal income tax returns in that year and that year alone."

These statements are a simplification—almost an oversimplification—of tax law, but in our business we see so many instances where even the most elementary characteristics of corporate tax law have been confused that it seems better to begin with a possible oversimplification and build from there.

Do you know what type of corporation you have and why you have it? Is it producing the tax results that it should? Is your tax year (your fiscal year) the best for you that the I.R.S. will allow?

NATURAL BUSINESS YEAR A "natural business year" ends at a time when your cycle of accounts receivable, accounts payable, inventory, and/or cash reach similar (or opposite) points. It’s important to know because there can be advantages to having your fiscal year end at the end of your natural business year.