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What is C corporation?

Any corporation that is taxed separately from its owner is called C corporation under United States Federal Income Tax Law. Even C corporation or C corp is the most common corporation type but still it is not always the top choice for small business owner. Limited Liability protection is provided by C corporations to the owners. Owners are called shareholders in C corporation. Owners are typically not personally responsible for business debts and liabilities. There are many perks in starting a C corporation and one of them is greater tax advantage as it offers an expanded ability to deduct employee benefits, which are most often used by growing business. All for-profit corporations are automatically classified as a C corporation.

Advantages of C corporationDisadvantages of C corporation
Under Limited liability protection, Owners are not typically responsible for business debts and liabilities.“Double-taxation” is the biggest negative aspect of C corporation. Whenever a C corporation earns money, it has to pay tax. Every time corporation issues a dividend then the shareholders are taxed on the amount they receive which results in the income “twice taxed”
The advantage of having unlimited owners or shareholders is also available under C corporation.To form a C corporation one has to go through complicated formalities like drafting articles of incorporation and bylaws which asks for details like the corporation’s name, address, business purpose, and the name of its registered agent, and how many shares of stock will issue.
If any owner of C corporation incurs a disabling illness or dies, the corporation does not cease to exist.C corporation is expensive to maintain. If we consider all the costs associated with the preparation of the corporate tax return, compliance with corporate formalities, and the double taxation of corporate profits then a C corporation can be quite expensive to its shareholders.
Since owners who work for the business are classified as employees, C corporation offers self-employment tax savings.
Less frequently audited than sole proprietorships.
In comparison to a sole proprietorship or general partnership, a C corporation may be perceived as a more professional/legitimate entity.
By selling a share of the stock additional capital can be raised.

How to apply for C Corporation

1. Apply

Complete our Simple Form

2. Questionnaire

Answer our few easy questions in
little time

3. Documents

Your documents will be assembled by us in little time and file them directly to the secretary of state.

4. Complete

In no time, you will receive your Limited Liability company package by mail.

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Frequently Asked Questions

1. How C corporations are taxed?

The taxes are paid by C corporation on their own. Any distributions made to stockholders are taxed again at the stockholders’ tax rates even after the corporate income tax is paid on the business. Shareholders get the income as wages which is taxed on the shareholder’s personal income tax return.

2. Can AC corporation own another C corporation?

YES! A-C corporation can own another C corporation.
Owner Corporation- Parent
Owned Corporation- Subsidiary

3. What does C in C corporation stand for?

Under United States federal income tax law, a C corporation means any corporation that is taxed separately from its owners. A-C corporation is different from the S corporation which generally is not taxed separately.

4. Is C corp better than LLC?

If no election is made with the IRS after setting up an LLC then the income from the LLC will pass through to the owners in the same manner as it does with a sole proprietorship or general partnership. From a tax standpoint, an LLC can also elect to be treated as a C corporation or an S corporation.

5. Can a C corporation be a member of LLC?

YES! It is possible for LLC to have a C corporation as its member. The income of LLC’s would pass through to C corporation. Unlike LLC’s a C, a corporation files its own tax return separate from its owner. Remember, a c-corporation would report the profit/loss on its own tax return.

6. Can an S corporation be owned by S corporation?

S corporation cannot have another corporation as a shareholder. After December 31, 1996, S corporation may now own 80% or more of a C corporation or 100% of a qualified subchapter S subsidiary.

7. How is stock distribution handled by a C corporation?

C corps are able to sell ownership shares to the general public in order to raise capital through the distribution of stock which makes them unique. The company must list in their articles of organization the number of shares with their par value, which will be initially distributed. The company will be able to distribute the shares, once the number of shares has been recognized by the state.