What are the Benefits and Requirements of a C Corporation?

A business can be set up in a variety of ways, ranging from a sole-proprietorship to a general partnership, an LLC to a corporation. Corporations are remarkably different from other forms of businesses in the sense that it is an independent legal entity that is separate from the people who own, control and manage it.
Due to this recognition as an individual entity, it is viewed as a legal "person" in the view of tax laws, and can thus be engaged in business and contracts, can initiate lawsuits and itself be sued. It also must pay taxes.

A C corporation is a business term that is used to distinguish this type of entity from others, as its profits are taxed separately from its owners under subchapter C of the Internal Revenue Code. Contrast this with an S corporation where the profits are passed on to the shareholders, and are taxed based on personal returns. This is done under subchapter S of the Internal Revenue Code.

A C corporation is owned by shareholders, who must elect a board of directors that make business decisions and oversee policies. In most cases, a C corporation is required to report its financial operations to the state attorney general. Because a corporation is treated as an independent entity, a C corporation does not cease to exist when its owners or shareholders change or die.

Another major advantage of a C corporation is that its owners have limited liability. Thus, they do not stand personally liable for debts incurred by the corporation. They cannot be sued individually for corporate wrongdoings.

Major Benefits of a C Corporation


There are various routine formalities that a C corporation needs to follow. These routines are an integral part of the working of a C corporation, and failure to follow these formalities can lead to serious consequences, including denial to recognize the company as a corporation. The formalities that need to be followed in a C corporation are:

Limits on the Limited Liability

While a C corporation is an attractive way of forming a business due to its provision of limited liability to its owners, there are certain circumstances wherein the limited liability will not be able to protect the owner’s personal assets. An owner will be held personally liable if:
By InvestorGuide Staff

Copyrighted 2020. Content published with author's permission.

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