Why Would You Choose an C Corporation?

Overview of C Corporation vs. S Corporation and LLC

A C corporation (C Corp) protects owners’ assets from creditors. Unlike an S Corporation or LLC, it pays taxes at the corporate level, subject to double taxation. A C-corp can offer various stocks, attracting investors. An S-corp is limited by the IRS on stock type and shareholders. A C corp must comply with more state requirements than an LLC.

Establishment of a C Corporation

  1. Select and obtain a corporation name.
  2. Appoint officers.
  3. File articles of incorporation.
  4. Adopt bylaws.
  5. Elect directors.
  6. Hold meetings.
  7. Keep minutes.

Pros and Cons of C Corporations

Pros:

  • Perpetual existence – Death of owner doesn’t affect corporation.
  • Limited liability – Assets protected from company debts.
  • Attract investors – Can raise capital by selling shares.
  • Attract talent – Offer stock options and benefits.

Cons:

  • Double taxation – Taxed at both corporate and shareholder level.

Factors to Consider When Choosing Between C Corp and S Corp

  • Why choose C corp over S corp?
    • C corp is the standard corporation for IRS rules.
    • C corp better for raising venture capital.
    • C corp allows US-based and foreign shareholders.
    • C corp allows unlimited shareholders and multiple stock classes.

Advantages of a C Corporation

A key advantage is: It avoids double taxation by having its income taxed as if a partnership.

Conclusion

Contact lawyers to choose between "C Corp" or "S Corp". Expert business attorneys are your best bet. How you incorporate is of highest importance.

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