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C Corporations & You

C-Corp
2 Minute Read

Key Points
  • C Corporations Can Provide Many Benefits
  • C Corps are Legal Entities
  • There are many types of corporations

What Is A C Corporation?

A C Corporation is one of the numerous legal entities formed to recognize a corporation for regulatory tax and official purposes, officially. A C Corporation is simply a company form that contrasts with other standard business structures such as Limited Liability Companies (LLCs), S Corporations, and Sole Proprietorships.

C-Corporations can range in size from sole proprietorships to multinational corporations with hundreds of shareholders and directors. This company structure is unique in that it is a legal and tax-paying entity distinct from the owners. As a result, C-Corporations are typically more complicated than other company forms. They do, however, provide more liability protection.

A C-Corporation is formed with state authorities and is controlled by the state’s corporate laws. To incorporate, you must register your business name with your state and file articles of incorporation. Additionally, c-corps are assessed a charge.

The Benefits of Creating a C Corporation

Several more common reasons for small businesses in the United States to incorporate as C corps are to obtain additional legal protection and tax advantages. Consider the following benefits in further detail.

  • Capital Raising Capacity

C corporations can raise money—or “capital”—by selling stock. The concept is to convince investors that your business will continue to be successful and that the value of your shares will increase. This is especially beneficial if you have a fantastic company concept but lack the capital necessary to get it off the ground.

  • Protection Against Liability

Numerous businesses prefer to incorporate as a C company to protect themselves. When you own a single proprietorship, your personal funds and the business funds are combined. If your firm runs out of money, you will run out of money as well. If the business is sued, you are also sued. However, a C corporation has a distinct legal and financial standing. If something goes wrong with your firm, the corporation’s money is at stake. Your personal belongings are secure.

  • Longevity

Because C companies are distinct legal entities, they do not dissolve immediately upon the death of an owner. For instance, suppose you and a business partner hold a C corporation jointly. Your partner chooses to leave the firm one day. They can sell their shares, and the business continues to operate. An alternative company entity, such as an LLC, might dissolve under the same scenario. However, a C corporation is capable of rolling with the punches.

How To Incorporate a C Company?

The following are the procedures necessary to form a C corporation:

  • Choose an available business name that adheres to your state’s corporate naming regulations.
  • Apply for an employer identification number (EIN) or a similar type of tax identification number.
  • Appoint C corporation’s directors
  • By submitting articles of incorporation, you may register your C company. You’ll also need to pay the filing fee—which for every state in which you incorporate.
  • Allocate stocks to the C corp’s initial stockholders
  • Obtain the licenses and permits required for your business

While these types of corporation have several advantages, they are not appropriate for all businesses. Before incorporating, thoroughly evaluate all potential costs and benefits. If you’re still uncertain, consider establishing a pass-through entity first. You can always change your firm later to a C-Corp.

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