If you want to start a C Corporation (C Corp), it is required of you to understand exactly what this structure entails before you act. Here, the US Filers will be with you through the story of C Corps from their incept(ion), the scope of their benefits, and the limitations of their drawbacks through depiction of how they operate among other business entities.
C Corporation, by legal definition, is a business structure that is usually used to give companies the right to appear in the legal context and act differently from their owner(s) or control personnel. This plan is ideal for companies that seek capital, s(ha)r(e purchasing) from the public or if shareholder numbers are more than 75. US Filers are in a position to guide you and make you aware of the difficulty in setting up a C Corp, particularly so that you can circumvent legal and regulatory issues.
C Corporations cover so much of the daily needs of people and it is not only that the big players of the US industry are under the shell – many of their companies are formed as C Corporations. The US only alone has roughly 1.4 million small businesses that are organized as C Corporations. Over and above that, the majority of companies, 64% of the Fortune 500 companies, including 64% of the most successful US companies, are formed as LLCs in Delaware. Some distinguished C Corps are Apple, Microsoft, Amazon, and Starbucks.
Asset Protection: A C Corporation operates as a separate legal body, thereby shielding the personal assets of its owners from its own debts and liabilities. This means that shareholders, directors, and investors do not have to take on the company's responsibilities personally. US Filers’ experts are present to review your company’s C Corp configuration to make sure it gives you the necessary protection.
Flexible Ownership: A business owner can sell or buy stocks of a C Corp to determine the ownership of the company. Investors can easily trade the shares and on the other hand in the case of the company being publicly traded, even both the institutions and the public can purchase the shares.
No Ownership Limits: No limits are set on the number of shareholders in a C Corp, unlike LLCs, and S Corps. This makes the capital raising process simpler.
Attractiveness to Investors: Stocks issued by C Corporations are generally more popular among venture capitalists and other investors as they come with the added advantage of being able to issue stock and eventually undertake substantial projects.
Double Taxation: C Corporation is a type of business that is subjected to two-fold taxation: that is where a company pays taxes corresponding to the received profit and the individual is taxed on the dividends they got from the same profit.
Complex Regulations: Much to the chagrin of C Corp owners, they have to comply with multiple formalities, which include holding regular meetings, keeping accurate records, and filing detailed reports, to name a few. US Filers can help to regulate this demand which makes your business a complacent one.
Non-Deductible Losses: C Corporations, unlike LLCs, and S Corps, cannot share losses in tote with owners on their respective personal tax returns. MSK PLC has the option of deducting these losses from the corporate tax the following year.
Higher Costs: Running C Corps with bigger operating expenses (whether this is in the form of capital costs or continuous system maintenance and support) may be more expensive compared to other business structures.
Nevertheless, the benefits that the C Corps offer, especially for a business that wants to dash to growth, stand distinctly from S Corporations and LLCs by some factors. For example, non-C corps in the form of S Corps and LLCs have the luxury of channeling their income free for owners to handle personal taxes without the barrier of double taxation. However, the strength that C Corps possesses for the start-ups that think that they can grow high in the future, are the IPOs or high investor atom, where people want to get their slice of a large pizza. US Filers are always at your service with a detailed comparison to help you to the right entity.
C Corporations are taxed separately from the owners. Under the new 2018 Tax Cuts and Jobs Act, C Corps now pays a flat corporate tax rate of 21%. Though this seems to be less than the previous income tax rates, C Corporations also suffer the curse of double taxation which may most times add on the whole tax load. US Filers can help tease out these stipulations and ensure the best tax treatment of your C Corp.
Deciding whether to start or convert to a C Corporation depends on your business goals. If you plan to have an IPO, issue multiple classes of stock, or have more than 100 shareholders, a C Corp might be the right choice. However, it's essential to consider the additional tax obligations and regulatory requirements. US Filers can help you evaluate whether a C Corporation aligns with your long-term business strategy.
Even though C Corporations are indeed quite valuable since it is intended to give a business great opportunities for capitalization, market product shares, public trading, etc., the issue of compliance and higher costs do stand out as a downside. In the case that you are about to start a C Corp, US Filers can advise you on the proper arrangements and guide you to your proper set-up for the company. If you are involved in a start-up or are looking to expand your business, the services of US Filers are available to help you with the formation and administration of the C Corporation.
FAQs
The primary difference lies in taxation. A C Corporation is taxed separately from its owners, leading to double taxation (once on the corporation's profits and again on dividends). In contrast, an S Corporation allows profits to pass through to the shareholders' personal tax returns, avoiding double taxation.
Yes, one of the advantages of a C Corporation is that it can have an unlimited number of shareholders, making it an attractive option for businesses planning to raise significant capital or go public.
C Corporations must adhere to several formalities, including holding annual meetings, maintaining detailed records, filing annual reports, and following corporate bylaws. These requirements are more stringent compared to other business structures like LLCs or S Corporations.
While a C Corporation offers benefits like asset protection and the ability to raise capital, it may not be the best choice for all small businesses due to the complexity and cost of compliance. Small businesses often prefer LLCs or S Corporations, which offer simpler management and tax benefits.