C corporation

C Corporations

 

General Information

C corporations, abbreviated as C corps, are an easy way to structure the ownership of a business. They are one of the oldest and most popular business entities to be registered on a state level. C corporations can be registered by filing Articles of Incorporation with the Secretary of State in the state of incorporation. Still, the policies, costs, and regulations for a C corporation differ within each state.

Is C Corporation the Right Choice for Your Business?

C corporations are usually for larger businesses. One of the main reasons to choose a C corporation is because it protects the owner’s personal assets, can have multiple classes of stock, and does not have a restricted number of owners which makes it all the more appealing to potential investors.

Pros

·         Limited Liability Protection:
In a C corporation, personal assets are provided legal protection, this is because they are separate from business assets. The personal assets of the shareholders are safe from a variety of liabilities.

·         Independent Existence:
A C corp. does not need to have an owner for it to exist. In other words, it can have perpetual existence.

·         Easy to Raise Money:
By selling some shares, you can easily raise money in a C corporation.

·         Fluid Transfer of Ownership:
Transferring ownership in a C corporation is not complicated: you can simply transfer ownership by selling the stock.

·         Credibility:
Corporations are regarded as legitimate organizations, which enhances their credibility and business value. Corporations are also considered more credible than sole proprietorships.

Cons

·         Taxation:
C corporations are required to pay tax on their profits at a corporate level. These profits cannot be allocated to shareholders without personal tax returns, which results in double taxation.
Double taxation may not influence larger companies as much as it would if they were small businesses.

·         Expenses:
Corporations are under the constant scrutiny of the state, which forces them to abide by all corporate laws. In such cases, the hiring of legal counsel and other experts increases the overall running cost of the company. Additionally, corporations must pay fees that vary from state to state. In the case of interstate businesses, other taxes and fees must be paid.

·         Rigid Rules for Dividend Distribution:
The profits of a corporation are distributed based on stock holdings. On the other hand, partnerships may distribute the profits on the basis of employment in the company or the investment. For example, if a stockholder owns 17% of the corporation’s stock, he will only be given 17% of the profits, but if this same person was to invest in a company with no legal identity, he may receive more than 17% of the corporation’s stock. States give out very rigid rules and also manage the way a corporation divides its profits. Previous operations must be offered to be granted the dividends. If this is ignored, the directors can be held accountable by the creditors.

The independents attorneys on TrademarkCounsels.com can use their years of experience to weigh the pros and cons of your company becoming a C corporation. They can analyze your business model, its needs, and your objectives. Keeping all of these factors in mind, they can help you make an appropriate decision that will have long-lasting effects on your business. You can easily get legal advice by hopping on live chat and ask to be connected to an attorney.

The Requirements for Becoming a C Corporation:

A C corp. has to fulfill a few requirements, which include:

Annual General Meetings (AGMs):
Annual meetings must be held by the board of directors and shareholders. Discussions and decisions regarding important matters such as information, potential opportunities, risks, strategic decisions, and issues are made during these annual meetings.

Issuing Stocks to Shareholders:
The stocks must be issued to shareholders in order to indicate their ownership in the corporation. A board of directors is elected by the shareholders. This board of directors is responsible for supervising the management of the corporation.

The Board of Directors:
The board of directors appoints officers who oversee the daily activities taking place within the corporation. This board of directors is also responsible for drafting the rules and regulations of the corporation. These are written statements that will determine the way a corporation will be managed.

Positions:
A C corporation must have all the positions listed below. One person is eligible for more than one position, given the corporation is small.

1.       Shareholders:

·         The shareholders own the company’s stock.

·         They are in charge of electing the board of directors, revising the bylaws, and drawing up the Articles of Incorporation.

·         Significant actions carried by the corporation must be authorized by its shareholders.

·         They can also terminate the corporation.

 

2.       The Board of Directors:

·         The directors supervise the corporation.

·         They are also held accountable for the issuing of stocks and appointing of officers. Lastly, the board of directors plays a key role in making crucial decisions for the corporation.

 

3.       Officers:

·         A C corp. must include a president, a secretary, and a treasurer for making daily decisions. These decisions control the corporations functioning.

·         These officers are responsible for making the day-to-day decisions that manage the corporation’s functioning.

 

4.       Employees:

·         Employees work for corporations and are paid salaries for their work.

If you have any queries regarding the process of becoming a C corp., do consider getting in touch. You can also contact one of our representatives on our website’s live chat. If you purchase one of the packages available at Trademark Counsels, you get the legal advice for no charges at all.