Know about C Corporations

c corporation

C corporations are referred to as plain corporations and represent big business. C Corp is a legal entity that protects the personal assets of the creditors. It has an unlimited number of owners and multiple stocks. Its diverse advantages attract venture capitalists and other types of equity financers. The S corporation or LLC pays taxes at the corporate level. It has the disadvantage of double taxation and it has to comply with the federal and state requirement. But such limitations don’t apply to C-Corps Businesses choosing to operate as a C corporation can offer diverse structural advantages than S corporations and LLCs. 

Advantages of C Corporations:

The C-Corp legal structure taxes the shareholders and owners from the entity. There are sure advantages of the C corporations, and they have a separate legal identity and there are no restrictions on who holds the shares. The C corporation has widespread acceptance by venture capitalists and other investors as they render flexible tax planning opportunities.

Characteristics of C corporations:

After forming the corporation has a life of its own, it has its rights, responsibilities, and liabilities. The corporation can sue in its name and can buy, sell and use property, own contacts and guarantees and also invest funds, and lend money. Being a sole entity, it has its debts, liabilities, and obligations. Its investors and stakeholders should meet the obligations of the corporation and not its board of directors.

The corporation exists separated from its shareholders and thus enjoys a perpetual existence. Once formed, a C Corporation maintains its existence until someone dissolves and liquidates it. And the transfer of shares and stocks has minimal impact on the existence of a corporation. The shareholders of the corporate stock have both management and economic rights and they can freely sell their shares. The buyer will then become the shareholder, enjoying the same rights. 

The C corporations are highly attractive to investors as they can acquire capital through equity financing. Owing the shares is considered preferable to owning memberships in an LLC. Venture capitalists show interest in C corporations as there are not many tax restrictions to abide by. A board of directors manages C corporations and appoints officers to handle the day-to-day operations of the business. Finally, individuals who are not citizens of the US and resident aliens can also hold stocks in C corporations, but this is not possible in an S corporation or LLC. S corporations also hold a 100- shareholder limit. 

Downsides of C corporations:

A corporation is complex to operate and its laws abide by diverse formalities. The corporation has to pay corporate income tax and is subject to double taxation. The C corporation shareholders receive economic benefits based on their ownership of shares but are not allowed to run the day-to-day affairs of the business.

Choosing the Right Business Structure

Forming a C corporation has diverse advantages and the business owner decides to decide on what type of business they wish to form, depending on the nature of their business and its growth plans.