C corporation definition

Public corporations are regulated by federal law through the Securities and Exchange Commission (SEC). In order to establish an LLC, founders must file Articles of Organization with whatever agency manages business registration in their state(s). These are different from the Articles of Incorporation filed by a c-corporation meaning corporation. First and foremost, you need to choose a name for your corporation. Once you have found a suitable name, you should reserve it with your Secretary of State if name reservation is available for C corporations in your state. Forming a C Corporation can be tricky, so let us do the hard work for you.

This kit is a collection of forms, papers and other items that makes it easier for you to create and manage your C Corp. Each state has different rules, regulations, and fees when it comes to forming a C Corp. For example, if you’re starting a C Corp in Arkansas, you’ll pay a $50 filing fee, but if you’re starting a C Corp in Nevada, the filing fee is much higher at $725. Here’s everything you need to know about this type of business entity before you make your decision. To organize your business as a C corporation and keep it in line, you’ll need a lawyer and an accountant — perhaps teams of both — and they will cost you time, money and energy.

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C Corporations are exceptionally beneficial for companies dedicated to the sale of goods. For example, when a C corporation demands cash flow, inventory and other business assets, such as accounts receivable, can be exchanged for factored business loans based on in-house collateral. A C corporation also has unlimited potential for growth, as you can sell stocks anytime you wish to expand your company when you need financing.

Unlike other structures that limit the number of shareholders, C corporations can have an unlimited number of investors. Indeed, many of them, if they are for-profit businesses or not based in the United States, can’t invest in S-corps, and many prefer not to wade into investing in LLCs. Let’s say you want to scale up your coffee shop business so it has a regional or national presence.

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Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. As with other structures, however, owners of a C corporation receive limited liability protection, which guards their personal assets should the company incur debts or legal issues.

In that case, you will have one corporation paying annual fees in two states (which many people do). While we like and often use S Corporations, we keenly appreciate the advantages of C Corporations. They certainly have their merit and a place in your entity structure strategy. For an LLC, the main advantage of S-corp taxation is that it may save money on self-employment taxes. They must pay themselves a reasonable salary, but additional company earnings are considered distributions, which are not subject to Medicare and Social Security taxes. Under the default LLC tax structure, owners are self-employed and must pay self-employment taxes on all company profit.

Formation

Additionally, almost all C corporations are publicly traded companies. One of the more common business structures company owners employ is a C corporation. C corporations – or C corps – can be a great choice because they offer owners more protection, but cost more.

• Most of the differences between entities are more noticeable once you get up and running.
• However, some corporations, such as charities or fraternal organizations, are nonprofit or not-for-profit.
• Though it offers advantages, what differentiates this type of business or enterprise from others is that it is taxed separately from its shareholders; the business’s profits are taxed at both the personal and corporate levels.
• These articles include the number of authorized shares along with other basic information about the corporation and its incorporating entities.
• Diego, Chloe, and the other shareholders aren’t personally responsible for repaying that money.

You will want to check with your particular secretary of state to find out the actual fee. Attorney fees can range between $500 and $5,000 for the entire process. To form a C corporation, you must file articles of incorporation with your state according to its particular regulations, which can vary slightly from jurisdiction to jurisdiction. Bylaws and a charter must be drafted as well, and stock must be issued, even if a C corp has just one shareholder.

S corporations elect special tax status by filing an IRS Form 2553, under Subchapter S of the Internal Revenue Code. C corporations and S corporations both offer owners and shareholders limited liability protection; separating businesses negligence from personal responsibility. A C corporation is a business structure that allows the owners of a business to become legally separate from the business itself.

• Although the term “corporation” usually refers to C corporations, there are other forms of this business structure, as well.
• Further, the business must have company bylaws on the premises of the primary business location.
• A C corporation is preferred compared to other forms of business for high income/high tax bracket owners.
• The difference between a C corporation and other structures, such as an S corporation or a limited liability company (LLC), is that C corporations are required to pay both federal and state taxes.
• C corporations are the most common type of corporation, versus S corporations or LLCs.