C Corp Registration – Going Big and Going Public
Business registration is mandatory if you intend to secure your business and its branding. In most cases registration is absolutely necessary for tax purposes or for legally operating a business. Yes, the main purpose of incorporating a business is to shield your personal assets and to avail certain tax benefits. When starting a business the options available for small business owners are whether to incorporate an S corporation or C corporation and the choice purely depends on the business goals. The most common and traditional type of corporation in the United States is the C Corporation. A C Corp basically refers to the manner in which the corporation is organized and how the corporation will be taxed.
What is a C Corp?
A C Corp is the term that is used to distinguish the type of entity from others as their profits are taxed separately. They are indeed taxed in a specific way and the tax percentages depend on the profits earned by the corporation. A C Corp is a standard corporation structure that allows the company to have unlimited number of shareholders. A C Corporation is also viewed as an independent entity. Hence a C Corp will not cease to exist when the owners or shareholders change. The owners also have limited liability and are not held personally liable for the actions, liabilities and debts the Corporation incurs.
How C Corp registration is undertaken?
A C Corp is a time-tested business formation. It is established with the state authorities and must abide to the corporate laws and regulations that pertain to the state where it is legally incorporated. Generally the Secretary of the state’s office is responsible for the registration formalities related to the Corporations.
- In order to form a C Corp business, first and foremost of all you will have to duly register the name of your company. If you intend to operate your company under a name different from the officially registered name then you may also be required to file a fictitious name as well.
- Then you will be required to file the relevant documents like a certificate of incorporation or the articles of incorporation. The articles of incorporation should specify the name and address of the corporation, the nature of business, the designation of the registered agent and include information about the stock. This should be done at the state office or with the state secretary by paying the applicable fees.
- You will also be required by law to officially adopt the corporate laws, conduct and document annual meetings of board of directors and share holders and issue shares or stock to its owners. You should also specify the number of officers and their duties and responsibilities.
- Generally you need not require the services of an attorney in this regard and you can prepare and file the articles of incorporation if you are well-versed with the requirements of the intended state of incorporation.
- Once the corporation is duly registered you must procure the relevant federal employee identification number, business licenses and permits. However, the rules and regulations may differ by industry, state and the locality.
- You are also required to file the annual reports and pay the relevant annual fees.
- Rush filing, which limits the formation filing time-frame to 24 to 48 hours is available in certain states. This incredible service secures your company name and incorporation in just 24 to 48 hours time.
- There is no age, residency or legal requirements to form a C Corp. However some states may require that the directors should be 18 years of age or above.
The amazing benefits of incorporating a C Corp:
Incorporating a C Corp business helps you to establish some financial and legal separation between you and your business.
- It ensures limited liability protection. Owners are not held responsible for the business debts, actions and liabilities.
- They can have unlimited number of shareholders.
- As ownership is unrestricted this is the best form of corporation for large companies that intend to publicly trade.
- The owner has the right to issue multiple classes of stocks to its share holders.
- It also assures the simplicity of ownership transfer by mere sale or transfer of stocks. Sale of stock assures incredible potential for growth and expansion.
- C Corp is one of the most familiar and traditional business types making them the most comfortable choice for owners.
- In most states the filing fees applicable for incorporating a C Corp is considerably less when compared to the fees applicable for the LLC.
- C Corp assures the opportunity to use the medical reimbursement plan.
- It can avail certain tax benefits, like tax deductible business expenses.
- The C Corp has an unlimited life and does not cease to exist if the owner incurs any disabling illness or even dies. This assures perpetual existence even if the owner leaves the company.
- The owners are entitled to receive reasonable salaries.
- Additional capital can be raised easily by selling the stocks.
- A C Corp has also the right to retain a considerable portion of the earnings for the purpose of business without distributing it to the share holders. Yes, it has the ability to accumulate earnings for the purpose of future expansion of business.
- A C Corp is indeed perceived as a more professional and legitimate entity.
- They are usually at a lower risk of being audited by the government.
- Even foreign nationals have the right to own or invest in a C Corp.
The Cons of C Corp:
- The main disadvantage of C Corp is that they are subject to double taxation. The profits are first taxed to the corporation and then taxed again when they are distributed to the shareholders in the form of dividend.
- It requires tedious filing formalities and time- consuming paper work.
A C Corp is an attractive way of incorporating a business due to the limited liability to its owners. This is indeed touted as more flexible and versatile than S Corps in terms of owners. It is also easier and simpler to start up a C Corp. No wonder C Corporation is the most preferred choice of incorporation for developing and accelerating businesses.