C Corporations

The C Corporation is just one option of many when selecting a Corporation. Generally, the C Corporation is the standard corporate form. The C Corporation gets its name because it is governed under Title 26 Subchapter C of the United States Code.

C Corporations have what is called “double taxation.” This is the case because, in the eyes of the law, the C Corporation is seen as a separate legal entity, a person. Thus, the IRS feels that just as you are taxed on the income you earn, so too should a C Corporation be taxed on the money it earns. The double taxation occurs when the C Corporation is first taxed on profits and the shareholders are then taxed individually on those monies that the C Corporation passes through to them in dividends.

The nice thing about C Corporations is that they can be public or private, they are not limited to a certain maximum number of shareholders, and they provide all of the limited liability for which Corporations have become so famous. Moreover, C Corporations have the ability to utilize different classes of stock. For example, some shareholders may be given stock that allows them to receive distributions and vote in the normal shareholder fashion. Other shareholders may only be given the right to receive distributions. Still others may receive priority distributions or even double distributions. Another common type of restricted stock is stock that limits the shareholder’s rights to sell.

Like most other Corporations and limited liability entities, C Corporations do require the observance of certain Formalities. In particular, a C Corporation adopts Articles of Incorporation and files them with the Secretary of State. Once the C Corp has drafted and filed the Articles of Incorporation, it will receive a Certificate of Incorporation from the Secretary of State and thereby become a separate legal entity. It is suggested that the C Corporation put By-Laws into place, hold regular meetings, put a Board of Directors in place, elect Officers, have an annual Shareholder meeting, and keep minutes.

C Corporations may appear overly burdensome, but that is only one way to look at it. Another way to look at C Corporations requirements is that by utilizing such a Corporate form you are in effect forcing yourself to pay careful attention to your business and document that this is the case. If, however, you already do keep records, hold regular meetings, and the like; you might as well benefit from the limited liability that a C Corporations can provide for you.

Our experienced staff at the Gabriel Law Office, PLLC can properly create a C Corporations to meet your business’ needs. We can discuss the advantages of the C Corporations particular to your business model. Ultimately, however, you will also need to consult an accountant in order to help you determine whether a C Corporations is the best entity tax wise for you and your business.

C Corporations
S Corporations

Contact Gabriel Law Office

Information Required