What is a C-Corporation ?
C-Corporations are a legal entity separate from it’s shareholders. Shareholders are interchangeable in that when a shareholder leaves the company or sells his or her shares, the corporation is able to continue doing business as before. The C-Corporation offers strong protection to its owners from personal liability. Corporations can have higher formation costs, require more extensive record-keeping, operational processes, and reporting than some other business entity types.
With a C-Corporation profits are taxed first at the corporate level and again when dividends are paid to shareholders on their personal tax returns. In some instances, however, a business owner may not want profits (or losses) to be reflected on their personal income tax return. Perhaps an owner has personal financial liabilities or legal issues that would make regular distributions undesirable. The C-Corporation can provide for greater separation of the business profit and loss from an owners annual reported personal income without affecting his or her equity in the business.
Some Defining Characteristics of the C-Corporation
C-Corporations have an advantage when it comes to raising capital because they can have foreign investors, and raise funds through the sale of stock. This can be a benefit in attracting employees.
C-Corporations can be a good choice for medium and large businesses, high-risk businesses, businesses that need to raise capital, and businesses that plan to “go public” with and IPO.
C-Corporations can issue preferred shares as well as common stock.
High bracket C-Corporation shareholders may benefit from the Tax Cuts and Jobs Act (TCJA) which provides for a permanent flat 21% corporate tax rate.