In the U.S., there are many ways to start a business. One of them is starting a C Corporation. How is a C Corporation different from an S Corporation and LLC? That's what we'll explain here. Furthermore, we'll help you decide if starting a C Corporation is right for you. Deciding how you want to start your company can be hard. Fortunately, our business consultants have a lot of experience. We'll take a look at your business and help you decide how to set it up. Starting a business can be tricky. Fortunately, there are resources to help. If you're wondering how to start your business, we can help. Call us today to learn more about starting a C Corporation.
What is a C Corporation?
Let's say you incorporate a small business. In this case, it is automatically a C Corporation. C Corporation is also a regular corporation. In other words, the government views a C Corporation as a legal entity. Likewise, this legal entity is separate from its owners. In contrast to an S-Corp, owners of a C-Corp are not shareholders. In other words, if the corporation is sued, shareholders are not totally liable. Shareholders will only be liable for their investments in the corporation. In other words, the government can't come after your personal assets. Additionally, any debts the corporation has are their responsibility. Once you are incorporated, shareholders are protected.
How are C Corporations Taxed?
C Corporations are seen by the government as a separate entity. Therefore, they are viewed as individual taxpayers by the IRS. In other words, corporations are subject to double taxation. This means you get two taxes on profits. First, you pay taxes for the business. Second, you pay taxes when shareholders get money. For this reason, some companies attempt to file as an S-Corporation instead.
What are the advantages of starting a C Corporation?
Despite its tax implications, there are some advantages to starting a C-Corp.
Limited Liability in C-Corp
First, most businesses consider starting a C Corporation for limited liability. In other words, your life savings will not be in jeopardy by a lawsuit. Shareholders are liable for however much they invest. However, the government cannot go after their personal assets to satisfy the debt. In this case, filing for a C Corporation might feel safer for business owners. You know that in case you get into financial trouble, your personal wealth isn't at risk. Instead, the government can only pursue what you invest.
Raising Money with C Corporation
When starting a C Corporation, it can sometimes be easier to raise capital. This is because the corporation will often have stocks to sell. In other words, stock opportunities can often lure in investors. Likewise, investors may be more interested in the opportunity for money. An investor is more likely to invest if they know they will receive payment. In other words, starting a C Corporation may remove the need to take out business loans to secure capital.
Attracting Qualified Employees
Starting an S-Corporation can also help you attract qualified employees. This is because stock options and fringe benefits are appealing.
What are the fringe benefits?
Another benefit of starting a C Corporation are fringe benefits. In other words, C-Corps can deduct certain fringe benefits from their taxes. Fringe benefits are also a benefit to prospective employees. For instance, future employees may find benefits like stock options enticing. The following fringe benefits are business expenses:
- Group term life insurance.
- Health and disability insurance.
- Death benefits payments of up to $5,000.
- Employee medical expenses that do not receive coverage by insurance.
Additionally, employees of C Corporations do not pay taxes on their fringe benefits. Other fringe benefits may include a company car or meals. For instance, if you offer free lunch, that's a fringe benefit. The more fringe benefits you have, the better. Top talent will be attracted to your company because of its benefits. In some cases, a pension is also a fringe benefit. The more you offer employees, the better talent you will receive. Likewise, the better the talent, the better your company does.
Existing in Perpetuity
Another benefit of starting a C Corporation is you exist in perpetuity. If the owner dies, the business continues on. However, this isn't always thought to be a huge benefit. There are other instances with a company where it continues on in the event of a death. Talk it over with your business consultant and see if this is a benefit for you. The experts at FinishLine Tax Solutions are here to help you with any questions you have. We can walk you through the advantages of starting a C Corporation. Additionally, we can help determine if a C Corporation is right for you. Deciding how to start your business can be a hard decision. However, it's one of the most important decisions you'll make.
Other Advantages of a C-Corp
There are other advantages to starting a C Corporation. These advantages include:
- Easier access to investments. This is because you have easier access to investments. Additionally, you can have an unlimited number of investors.
- Your C-Corp can also issue an unlimited number of shares. However, there's one thing you have to know. Depending on your number of shares, you may have to report to the SEC. That's just something you want to keep in mind. However, FinishLine Tax Solutions can also help with this.
- During tax season, you can deduct employee benefits. You can also deduct regular business expenses. This means that you have more money left in your budget. And more money means more ways to help the business. When it comes to more revenue, you really can't go wrong. The professionals at FinishLine Tax Solutions can help.
- Lastly, C-Corps have lower tax rates than S-Corporations. That's a huge bonus when it comes to tax season. The less you have to pay, the more money for your business. So, it may cost more to run a C-Corp. However, you may end up getting more money back. You can speak more about this with the professionals at FinishLine Tax Solutions. Contact them today. They're ready to help you start your C-Corp.
What are the disadvantages of starting a C Corporation?
There are also some disadvantages to starting a C Corporation. For instance, some of the disadvantages include:
- You have to pay double the taxes. In other words, you pay taxes on the corporate level. You also pay taxes on dividend distribution.
- C Corporations have to follow state and federal rules. You may have to hire lawyers, accountants, or other specialists. This can get expensive. Starting a C-Corp can mean more money out of your pocket. Consider that before starting a C Corporation.
- Rules regarding money distribution. Let's say you only own 8 percent of the company. In that case, you will only receive 8 percent of profits.
How are C Corporations Structured?
C Corporations have a specific structure. They aren't built like an S-Corporation or LLC. Here is how a C Corporation is typically structured:
- Shareholders own the company's stock. They also choose who the directors are. Additionally, they can make changes to how the business is run. Furthermore, shareholders approve major decisions.
- Directors manage the corporation. They are responsible for issuing stocks and choosing offers. Directors also make major decisions. Hiring great directors can make all the difference for your company.
- Officers include the president, secretary, and treasurer. These individuals take care of day-to-day decisions.
- Employees work for the company and make a salary. These are the individuals who benefit from the fringe benefits. The more benefits you have, the better employees you will get. Keep that in mind when deciding what benefits you offer. Benefits are often a huge part of the decision employers make. Your benefits can be the difference between them taking the job. If another company has better benefits, they may go there.
How to go about Starting a C Corporation?
There are several steps to start a C Corporation. FinishLine Tax Solutions can help you with these steps.
- Choose a business name. This name will have to follow the naming rules set by your state.
- Register for an employer identification number. Instead, you can also register for a tax ID number.
- Appoint the directors for your C Corporation.
- Register your C Corporation. The fee ranges for $100 to $800. Additionally, the fee amount depends on the state.
- Distribute stocks to your first shareholders.
- Get the necessary license and permits to run your business
Interested in starting a C Corporation? Call FinishLine Tax Solutions
Wondering how you can go about starting a C Corporation? Call the professionals at FinishLine Tax Solutions. We'll help you set up your business in a way that works for you. There are a lot of differences when it comes to incorporating a business. Making the right decision is very important. This is the first step in securing a financial future for your business. You don't want to make the wrong move. Give us a call and find out how we can help. We have years of experience helping business owners incorporate their companies. Dealing with state and federal regulations can also be tricky. However, we know the rules like the backs of our hands. We will get you set up in a way that works best for you and your company. Call us today to get started. Our team has years of experience. We can't wait to help you.
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