Â A C-corporation is simply a general business corporation under the C subsection of the IRS code.Â It is a separate legal entity and files its own taxes (Form 1120) separate from the shareholders, which can be unlimited in number.
Â A C-corporation is formed by filing Articles of Incorporation and paying the required filing fees.Â If you’re a shareholder of stock from a C-corporation, you’re being double taxed on the company’s income since the corporation is taxed and then the shareholder has to claim the dividends as taxable income as well.
Â In a C-corp, the members and shareholders are not liable for the debt and responsibilities of the corporation.Â Still, you must follow the same guidelines of holding corporate meets and recording the minutes.
Â C-corporations do not limit who can own the company, like an S-corp does.Â Plus, non-U.S. residents can be owners of a corporation.Â Control of a C-corporation falls under the company’s management team and board of directors who are elected by the shareholders.
Â The board of directors makes policy decisions for the company and each individual has his or her own responsibilities. Occasionally, shareholders must approve the actions the Board takes, such as amending the Articles of incorporation, mergers, or selling off corporate assets.Â A C-corporation has officers who carry out the daily tasks and the positions include executive titles such as President, Secretary, Treasurer, etc.Â
Â C-Corporations can also offer benefits such as health insurance or retirement options.Â To avoid double taxation, you can get paid salaries and benefits that the corporation can deduct.Â That way, you only pay income tax once instead of again if you received dividends.
Â As with other forms of corporate entities, a C-corp exists indefinitely.Â Death or resignation does not affect the existence of the company and shares can be transferred without causing a disruption in the company’s existence, either.
Forming a C-corp is advantageous when the taxpayers are in a higher tax bracket than the corporation and funds can be left in the company because it saves taxes.Â
Remember when filing that unless you specify that you want to launch an S-corporation, you will be forming a C-corporation and will have to abide by the laws governing that entity.