Business Incorporating with a C Corporation

Business Incorporating with a C Corporation by Frank Rodriguez

Most mid to large businesses in the US are C corporations. This is because of the many advantages that a company gains that are not available through the other corporate types. A C Corporation is a tax distinction and its corporate structure is geared toward meeting certain tax mandates. So it is important to break down the question, "What is a C corporation" to understand the logic behind forming these types of business corporation.

For individuals who are unaware of the entire structure and the business incorporating strategy behind the formation of a C corporation the double taxation is what stands out as the most striking characteristic of this type of corporation. However, while there is a double taxation which strikes individuals who are employees and shareholders, this rarely occurs.

The need for a company to have a steady influx of resources in an economic climate that places tremendous pressure on investors requires the company to step beyond their own back door. A C corporation is the only corporation that is allows to have non-residents and non-citizens participate as investors and shareholders of a corporation. This allows resources from other countries to support the corporate structure during economic downturn.

With other corporate structures liability regarding loss is spread throughout the owners, part-owners and shareholders of a company. A C corporation is considered an entity and any losses that occur to the corporation do not affect the owners, part-owners, etc., personally. The funds of the corporation are separate from that of the owners.

An owner cannot lose personal assets when the company folds or is sued for more than its assets. This is where the double taxation mentioned briefly above can come into play. The corporation is taxed for it's monies. If the owner of a C corporation is also an employee, say a president, and receives a salary or stock in the company they are taxed for that income. If the stock makes a profit, the president is taxed on the profit of that stock as income. Thus, double taxation.

What a C corporation is becomes clear when one looks at the global picture. A C corporation does not pay business taxes in the same way that the other corporate structures do. There are many more tax benefits available to a C corporation than the other corporate structure and there are many benefits to the owners, shareholders, and investors of a C corporation.

Among the benefits to a C corporation is the ability to pass losses forward and to deduct the value of any fringe benefits provide to employees in a company. If they have to reorganize the company this is tax free where with other corporation structure there would be a tax on reorganization.

It is much easier for C corporations to get financing and capital money because of the C corporation structure and their ability to provide stock and stock options without going through many of the steps that other corporations must go through.

Lastly, a C corporation does not end when the owners resign or leave the company. The structure of the corporation, it's stock and shares remain in tact. This creates the solidarity that many venture capitalists seek in company they may invest in.