Is double taxation “fair” to corporations and shareholders?

Do C corporations protect shareholders more than S corporations?

• I'm debating between C and S status for a small family business, and I came across this line in Wikipedia: "S corporations ... generally provide their shareholders with the same liability protection afforded to the shareholders of C corporations."  Why does it say "generally"?  In what ways (if any) do C corps protect shareholders more than S corps?

• Answer:

  No, they are both separate persons (in the legal sense) from their shareholder(s). S versus C refers to tax status. There are situations in which courts will disregard corporate status and hold owners liable, so it's important to maintain good records and other corporate housekeeping - avoid commingling funds, hold actual Board meetings and keep minutes of them, etc. Try a Web search for "piercing the corporate veil" if you want more background on this subject. Pragmatically, the best way to mitigate risk of liability is to do business using high ethical standards and get good insurance coverage. If you have to rely on limited liability of a corporation or LLC, you've already lost your business -- not a place you ever want to be. The most common legal claims against small businesses are "slip and fall" personal injury cases or relate to employment practices (usually filed by disgruntled former employees), so be very careful if you have employees to follow all of the applicable state and federal rules (especially in CA). There are some good handbooks out there for employers.