C-Corporation Overview

A C-corporation is a traditional corporation where the profits of the business are reported and taxed separately from the owners/ shareholders of the company. C-corporations are owned by the shareholders, who select a board of directors to manage the business. This type of company structure provides many benefits to business owners, including liability protection for business debts as well as tax benefits.

C-corporation profits may be held by the company for business growth or may be distributed to the shareholders as dividends. When distributed, dividends are taxable for both the corporation and the shareholders, a situation known as “double taxation.” The C-corporation is a popular business structure for companies with complex operations, numerous shareholders, or those businesses planning to sell stock on the public stock exchanges.

Businesses organized as C-corporations will need to hold regular meetings of the company’s board of directors, keep accurate minutes for board meetings, and file separate tax returns for the corporation. Small businesses should also consider and review the benefits of a S-corporation or Limited Liability Company (LLC) for their company’s needs and resources.

C-Corporation Ownership Structure

Businesses structured as C-corporations are owned by the company’s shareholders. The shareholders own stock in the company and vote for a board of directors to oversee the management of the business. Shareholders also must approve major business decisions such as mergers and corporate dissolution.

The board of directors of a C-corporation provides governance for the company and elects the officers of the corporation. Companies are required to hold regular board meetings and keep accurate meeting minutes. The corporations’ board of directors sets the strategic direction for the company and hires/fires the company’s top level managers.

The officers of a C-corporation are responsible for the daily operations of the company. They are members of the board of directors and serve at the pleasure of the board. Most corporations are required to have a president, secretary and treasurer, and may include additional officers such as multiple vice-presidents.

A C-corporation’s employees are those who work for a corporation in return for a salary or other compensation and who implement the strategy set by the officers and the board.

In smaller corporations, the business’s owners or founders may hold more than one of these positions.

C-Corporation Taxation Overview

A C-corporation is considered a separate legal entity from its shareholders and thus is taxed separately from the shareholders of the company. Unlike S-corporations, where the business’s profits and losses are reported on the owners’ personal tax returns, C-corporations must file independent corporate tax returns.

C-corporations are subject to different tax rates than individuals and may be able to claim additional deductions and tax credits. C-corporations may retain profits at the end of the year to be used for future business operations, or may decide to distribute a portion of the company’s profits to the shareholders in the form of dividends. Dividends are not considered deductible for the corporation as a business expense, and thus are taxable both for the corporation giving the dividends as well as for the shareholders receiving them.

LLC, C-Corporation, or S-Corporation?

Compare and choose the right entity for your new business.

 

LLC C-Corporation S-Corporation Partnership
Definition Combines elements of a corporation and a partnership. Separate legal entity with legal rights and liabilities that are different from shareholders (owners). Separate legal entity with legal rights and liabilities that are different from shareholders but that offers tax advantages by the IRS. Two or more people owning and operation the business preferably with a partnership agreement.
Number of Owners No limit No limit on shareholder 100 No limit
How to Start State regulated and Articles of Organization and required tax numbers. State regulated. Need Articles of Incorporations, bylaws and tax numbers. State regulated. Need Articles of incorporations, bylaws and tax numbers. Should have an agreement and required tax numbers.
Management Control Rests with management committee (owners or those shareholders). Rest with the board of directors appointed by the shareholders. Shared by owners shareholders. Shared by general partners according to partnership agreement.
Taxation Taxes can be assessed several ways based on the structure of the company but is taxed once. Profit is taxed to the corporation and then dividends to owners are taxed again. Profits from the company are taxed once. Profits are split among owners. Profits from the company are taxed once. Profits are split among partners based on partnership agreement.
Personal Liability Liability limited to corporation assets unless a personal guarantee is signed. Liability limited to corporation assets unless a personal guarantee is signed. Liability limited to corporation assets unless a personal guarantee is signed. General partnership personal assets are at risk, limited partnership.
Transfer of Ownership Yes Yes Yes Based in partnership.

Frequently Asked Questions

Our experts answer all important questions.

What is a Corporation?

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Who can form a Corporation?

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How are Corporations managed?

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What are the advantages of becoming a Corporation?

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How do I get started?

Quickly complete our convenient online order form, which collects all of the necessary information, and only takes a few minutes. Please contact us by email or phone, if you have any questions or would like help getting your order processed.

What happens if the company name I want is not available?

We request that you provide up to three name choices when you order. The name is selected based on your priority and availability. If all three names are not available, we will contact you for additional name choices.

What happens if I change any of my information after my order is complete?

Depending on the type of information that is changing. Some information, for example, company’s name, business purpose, number of shares and/or par value (for corporations), must be changed with the state by filing an amendment. The state filing officially updates the information the state has for your registered company.If you have any questions on whether specific information in your state-filed documents would need to be updated by means of an amendment filing, contact our office.

What if there is an error on my state-filed documents?

We are confident in our ability to provide accurate filings. We review each order we receive to identify potential errors. In the unlikely event that an error is made, We’ll respond promptly to remedy any error.We warranty our filing services against defects caused by us for the life of your company. We will absorb any fees/costs necessary to correct the error and will correct the mistake as quickly as possible.

If, on rare occasions, the state makes a mistake in entering your information. If you notice an error, contact us immediately and we will work directly with the state to correct it.

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