Is Filing a C Corporation Right For Me?
Read on to figure out if filing a C Corporation is right for your business needs
Is Filing a C Corporation Right For Me?
Read on to figure out if filing a C Corporation is right for your business needs
What Is a C Corporation?
C Corporations are one of the most popular business structures. In contrast to LLCs and S Corps, they come with many more regulations. However, C Corporations also come with their own set of advantages as well.
In general, C Corporation structure is better for larger businesses.
Sole proprietors or partnerships do not usually opt to file C Corporations because their advantages are more geared towards those who intend to gather investors, offer stock, and trade ownership of their business.
Most of the businesses that are household names are structured as C Corporations, although a C Corporation could consist of just one person. Keep reading to find out if a C Corporation is the right structure for your business.
The majority of larger businesses in the United States are structured as C Corporations, although a C Corp could, theoretically, consist of just one person. The information below will help you decide if a C Corporation structure is right for your business.
How Do You Form a C Corporation?
A C Corporation is a business structure and separate taxpaying entity that is formed and regulated on the state level. A C Corp is formed by filing “Articles of Corporation” in the state of incorporation. The regulations, costs, and formalities for C Corps vary from state-to-state.
The C Corporation has been a successful way to do business for decades. Especially for businesses who are started by groups of people pooling their resources and capital together. This is because their risk is solely limited to the amount of stock they own.
While C Corporations are a popular business structure, they certainly aren’t right for everyone. Find out if it’s right for you:
Should You Choose a C Corporation?
Pros
Limited Liability
Exist Independent of Owners
Ownership is Easily Transferred
Can Raise Money Through Initial Public Offering
More Credibility As A Business
Cons
Unique Tax Structure
Investors Are Double-Taxed
Extra Legal Requirements
What Is a C Corporation?
C Corporations are one of the most popular business structures. In contrast to LLCs and S Corps, they come with many more regulations. However, C Corporations also come with their own set of advantages as well.
In general, C Corporation structure is better for larger businesses.
Sole proprietors or partnerships do not usually opt to file C Corporations because their advantages are more geared towards those who intend to gather investors, offer stock, and trade ownership of their business.
Most of the businesses that are household names are structured as C Corporations, although a C Corporation could consist of just one person. Keep reading to find out if a C Corporation is the right structure for your business.
The majority of larger businesses in the United States are structured as C Corporations, although a C Corp could, theoretically, consist of just one person. The information below will help you decide if a C Corporation structure is right for your business.
How Do You Form a C Corporation?
A C Corporation is a business structure and separate taxpaying entity that is formed and regulated on the state level. A C Corp is formed by filing “Articles of Corporation” in the state of incorporation. The regulations, costs, and formalities for C Corps vary from state-to-state.
The C Corporation has been a successful way to do business for decades. Especially for businesses who are started by groups of people pooling their resources and capital together. This is because their risk is solely limited to the amount of stock they own.
While C Corporations are a popular business structure, they certainly aren’t right for everyone. Find out if it’s right for you:
Should You Choose a C Corporation?
Pros
Limited Liability
Exist Independent of Owners
Ownership is Easily Transferred
Can Raise Money Through Initial Public Offering
More Credibility As A Business
Cons
Unique Tax Structure
Investors Are Double-Taxed
Extra Legal Requirements
The Benefits of C Corporations
Forming a C Corporation comes with several advantages:
The Benefits of C Corporations
Forming a C Corporation comes with several advantages:
C Corporations have Limited Liability
A C Corp is a separate legal entity. That means the debts and liabilities of the business are separate from the liabilities of owners, shareholders, and investors.
Can Issue Stock to Access Funding
C Corporations can raise money by holding “Initial Public Offerings” (IPOs).
More Business Credibility
Many of the businesses you’re familiar with are C Corporations.
C Corporations Are Independent of Their Owners
A C Corporation exists, even as directors, investors, and shareholders come and go.
C Corporation Ownership Is Easy to Transfer
C Corporation ownership is decided by who owns the majority of the stock.
The Drawbacks of C Corporations
C Corporations do come with drawbacks. Here are a few of them:
The Drawbacks of C Corporations
C Corporations do come with drawbacks. Here are a few of them:
Different tax structure than other types of businesses.
There are strict legalities and regulations that need to be met.
Taxes for investors are doubled when dividends are paid to them.
How is a C Corp Different Than an S Corp or LLC?
S Corps and LLCs are two of the most popular business structures in the US. Both of these structures provide similar asset and liability protection of a C Corp, but with less legal formalities. This means less complexity and more flexibility for LLCs and S Corps.
How is a C Corp Different Than an S Corp or LLC?
S Corps and LLCs are two of the most popular business structures in the US. Both of these structures provide similar asset and liability protection of a C Corp, but with less legal formalities. This means less complexity and more flexibility for LLCs and S Corps.
Entity Type
LLC
C-Corp
S-Corp
Non-Profit
Has to file a separate tax return
Varies
How Are Profits And Taxes Handled With A C Corp?
A C Corporation is taxed as a separate business entity. Unlike individuals, C Corporations have to file a designated tax form with the IRS, which is called IRS Form 1120. Additionally, C Corporations have their own tax rates.
Corporations can retain some of their profits and earnings as part of their operating capital, this can shelter some of the profits from taxation.
C Corporation Tax Rates
The tax rates levied on C Corporations are as follows.
Profit
- Up to $50,000 — 15%
- $50,000 – $75,000 — 21%
- $75,000 – $100,000 — 34%
- $100,000 – $335,000 — 39%
- $335,000 – $10,000,000 — 34%
- $10,000,000 – $15,000,000 — 35%
- $15,000,000 – $18,333,333 — 38%
- More than $18,333,333 — 35%
Stock Dividends from C Corporations
A C Corporation may choose to distribute some of the profits of the company as dividends, which are distributed to shareholders. The percentage of dividends that each shareholder is entitled to depends on how many shares they own.
Dividends that are distributed to shareholders are taxed twice (double-taxed). They are taxed first at the corporate level as profit (on the corporation’s form 1120), and again at the individual level as stock dividends (on the shareholder’s form 1040).
A C Corporation must meet certain requirements:
Hold an Annual General Meeting (AGM) for the shareholders and the board of directors
The annual meetings are used to discuss and decide important information, strategic decisions, opportunities, risks and issues that the corporation will need to deal with.
Issue shares to investors as ownership of the business
Ownership in a corporation is expressed through the issuance of shares. The management of the corporation is governed by a board of directors who are elected by the shareholders.
Appoint a board of directors
The board of directors select officers who manage the day to day activities of the corporation. The board of directors also drafts bylaws for the corporation. These are written protocols that state the way that the corporation will be governed.
Assign Certain Positions in the Corporation
A C Corporation will need to have all of the following positions. In a small C Corp, one person could hold multiple of these positions.
- Shareholders: They own the company’s stock and are responsible for electing directors, amending the bylaws and articles of incorporation and approving major actions taken by the corporation like mergers and the sale of corporate assets. They alone are allowed to dissolve the corporation.
- Directors: They manage the corporation and are responsible for issuing stock, electing officers and making the corporation’s major decisions.
- Officers: The corporation must have a president, secretary, and treasurer. These officers are responsible for making the day-to-day decisions that govern the corporation’s operation.
- Employees: They receive a salary in return for their work for the corporation.
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How to Form a C Corporation
If you think a C Corporation is right for you, here’s how you file one:
1. Choose your business's legal name
2. In some states, the Secretary of State reserves names. If so, reserve the name.
3. File your Articles of Incorporation. These should be sent to your Secretary Of state.
4. Create and issue stock certificates to your shareholders.
5. Apply for a business license. Some areas may require licenses in your state, county, and township.
6. Apply for additional certificates. Some industries require additional certificates to conduct business.
7. Get your Employer Identification Number (EIN) from the IRS. You can file for this online, or complete form SS-4.
8. Apply for any other ID numbers required by your state and local governments .
9. Requirements vary from one jurisdiction to another. However, in most areas you will need to get ID numbers for unemployment, disability, and other payroll taxes.
10. Determine other positions as required by law.
Filing C Corporations can be stressful. So we’ll do the heavy lifting for you! UberBusiness has helped thousands of business owners make all aspects of business easy and stress-free. Right now, our experts are available to help you. Plus, you can form your business for free (plus the state fee).
