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Two provisions in the 2003 tax law directly affect whether you should or should not be a C corporation (as opposed to an S corporation): First, the new maximum tax rate on ordinary income is now 35% (down from 38.6%); second, dividends paid by C corporations are now taxed at the same rates as long-term capital gains (maximum 15%, down from 20%). The 35% is scheduled to return to 38.6% in 2011, while the dividend break will end December 31, 2008.

Okay, you C corporation folks… listen up. Following are the "pros" and "cons" of staying a C corporation or electing S corporation status (Hint: nine of 10 corporations enjoy tax advantages as an S corporation).

S corporation "cons"

1. You probably would pay more income tax in current year. Make the computation, but remember: When you want to get those after-tax dollars out of your C corporation someday, you will be double taxed. Also, see "pros" 1. And consider the top individual rate and the C corporation rate are the same 35%.

2. Health insurance premiums for shareholders/employees and their families are not fully deductible.

3. Long-term care premiums for shareholders/employees -including spouses -are not fully deductible.