Why a c corp

Most states require c corps to file annual reports and pay franchise taxes to maintain their good standing. Failure to file annual reports and pay franchise taxes can result in fines, notices, and the inability to conduct business. State laws require c corps to hold annual meetings of shareholders and directors and record meeting minutes. Owners and directors of a c corp use corporate minutes to reflect changes in management and important corporate activities.

Additionally, almost all state, county, and local governments require c corps to complete business license, permit, and tax registration applications before beginning to operate. The company is owned by shareholders, who elect directors. The directors set a vision for the corporation and are responsible for the management of the corporation.

The officers and managers hired by the directors are responsible with carrying out the vision on a day-to-day basis. Since a c corp is its own legal identity separate from that of its owner , a c corp can own an interest in an LLC. An s corp can own a c corp. However, a c corp cannot own an s corp. Much of this has to do with the structuring of a c corp vs an s corp. To learn more about what is an s corp and how it differs from a c corp, please visit the s corp page.

Generally the owners of a corporation cannot be held liable for the debts and obligations of the corporation.

However, if owners treat the corporation as an extension of themselves — sometimes referred to as "disregarding the corporation form" — such as, by commingling personal and corporate funds or making important decisions without holding board meetings or passing resolutions, then creditors can attempt to hold owners liable for the debts and obligations of the company — often called "piercing the corporate veil. Celebrate Small Business Month! New Order? Existing Order? Toggle navigation.

LLC More Learning Center Start-up Tasks Corporation vs. About Us About incorporate. We're an online bookkeeping service powered by real humans. Bench gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements every month. Get started with a free month of bookkeeping. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice.

Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein. Sign up for a trial of Bench. No pressure, no credit card required. For Partners. By Nick Zarzycki on April 8, Contents What is a C corporation?

The difference between a C corporation and an S corporation Benefits of forming a C corporation Disadvantages of forming a C corporation C corporation benefits and drawbacks How to form a C corporation.

Tired of doing your own books? Try Bench. Share this article. Get Started. Ability to raise capital The C corp structure makes it easier to bring on investors. Cost of incorporation C corps incur business expenses upfront in order to be formed, and ongoing fees to maintain. As noted before, corporations benefit from a wider range of tax deductions while also facing double taxation on shareholder dividends.

In contrast, LLCs benefit from pass-through taxation. This can be a good choice for a business that anticipates having outside investors or making its stock publicly available.

From a legal perspective, corporations have many precedents and case laws stemming from their existence throughout U. LLCs, on the other hand, are a relatively new business structure treated differently from state to state.

Similar to LLCs, S corporations benefit from pass-through taxation. As a result, S corporations typically work best for smaller companies. Other key differences include:. Overall, C corporations have more flexibility regarding ownership and stocks while facing more tax ramifications. As with any business entity, there are advantages and disadvantages to consider when deciding whether or not to incorporate your business.

Think of your long-term goals, business type, tax structure, and record-keeping requirements. This will help you determine the best structure for your business. C corporations protect owners, shareholders, officers, directors, and employees from personal liability. Independence From Owners.