C corporations can deduct the full cost of the fringe benefits it provides to its employees—including the business’s owners in most instances. This factor provides shareholders of C corporations with a slight advantage over other types of business owners because owners of limited liability companies, partnerships, and sole proprietorships may not take as many fringe benefit deductions. For example, sole proprietors, owners of partnerships, and LLCs cannot currently deduct 100 percent of their health insurance premiums (although the limit increases by increments through 2003 until these other businesses will be able to deduct the full cost of their health insurance premiums).
As we have seen, corporations are separate entities from their owner-shareholders. They are established as either C corporations or as S corporations (sometimes known as subchapter S corporations), and the tax laws apply to each of these differently.