Business Growth: Establishing a C-Corp

This continues our series on establishing the best legal entity for your business. I am not attorney. Consult with a legal expert.

Investors’ Guide defines a corporation

“Corporations are remarkably different from other forms of businesses in the sense that it is an independent legal entity that is separate from the people who own, control and manage it. Due to this recognition as an individual entity, it is viewed as a legal "person" in the view of tax laws, and can thus be engaged in business and contracts, can initiate lawsuits and itself be sued. It also must pay taxes.”

Definition of a C-Corp

Once again from Investors’ Guide

“A C corporation is a business term that is used to distinguish this type of entity from others, as its profits are taxed separately from its owners under subchapter C of the Internal Revenue Code.

A C corporation is owned by shareholders, who must elect a board of directors that make business decisions and oversee policies. In most cases, a C corporation is required to report its financial operations to the state attorney general. Because a corporation is treated as an independent entity, a C corporation does not cease to exist when its owners or shareholders change or die.

Another major advantage of a C corporation is that its owners have limited liability. Thus, they do not stand personally liable for debts incurred by the corporation. They cannot be sued individually for corporate wrongdoings.”

Benefits of a C-Corp

“Corporations are usually at a lower risk of being audited by the government

Owners and shareholders of a C corporation have a limited liability towards business debts

C corporation can deduct the cost of benefit as a business expense

Can be used to split the corporate profit amongst the owners and the corporation 

In a C corporation, there can be an unlimited number of stockholders

Additional funds can be raised by a C corporation by the way of sale of stocks

Foreign nationals have a right to own or invest in a C corporation

Greater number of diverse investors participate in the business”

Carefully discuss the advantages of a C-Corp with your legal counsel to see if it is appropriate for you.

Join me on Thursday when we explore the advantages of an S-Corp for your business