What are the Benefits and Requirements of a C Corporation?
A is a business term that is used to distinguish this type of entity from others, as its are taxed separately from its owners under subchapter C of the . Contrast this with an the profits are passed on to the , and are taxed based on personal . This is done under subchapter S of the .
A C corporation is owned by shareholders, who must elect a that make business and oversee . In most , a C corporation is to its to the state 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 . Thus, they do not stand personally for incurred by the corporation. They cannot be sued individually for wrongdoings.
Majorof a C Corporation
- As opposed to a an LLC, corporations are usually at a lower of being audited by the . or
- The owners and the shareholders of a C corporation have a limited towards business debts.
- A C corporation can deduct the of as a business . For example, they can the entire of established for as . These benefits are tax-free even for those them.
- A C corporation can be used to the corporate amongst the owners and the corporation. This can result in overall . The for a corporation is usually less than that for an individual, especially for the first $50,000 of .
- In a C corporation, there can be an unlimited number of . This allows the corporation to to a large of , which allows for more to be raised for .
- Additional funds can be raised by a C corporation by the way of of if the stands in of for
- Foreign have a right to own or in a C corporation. There is no binding on the type of investors as in the case of an S corporation. This lets a greater number of diverse investors participate in the business and also allows foreign to in for .
- The ( ) of a C corporation has the of issuing different "classes" of stocks to different shareholders. This helps attract different of investors as and both have their own distinct advantages that may to one but not to another.
FormalitiesThere are various formalities that a C corporation needs to follow. These routines are an integral part of the working of a C corporation, and to follow these formalities can to serious consequences, including denial to the company as a corporation. The formalities that need to be followed in a C corporation are:
- Adequate investment of money ( ) in the corporation.
- Formal of stocks to the initial shareholders.
- Regular of , and the shareholders.
- Upkeep and update of and of a corporation separate from those of its owners.
Limits on the Limited LiabilityWhile a C corporation is an attractive way of forming a business due to its of limited liability to its owners, there are certain circumstances wherein the limited liability will not be to protect the owner's personal . An owner will be personally liable if:
- He or she directly injures someone personally.
- He or she has personally guaranteed a or a business for the corporation, which the corporation fails to repay.
- The fails to taxes that have been deducted from the by the corporation.
- Such a person is part of intentional or other illegal action that results in to the corporation, or someone else.
- Such a person treats the corporation as an of his/her , rather than a separate entity.
- The that a corporation ceases to exist, as the corporate formalities have not been adhered to.
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