What is a C-Corporation and How Do You Create One?

A shareholder-owned corporation, or C corporation, is a company that is owned by its shareholders. A board of directors is elected by the shareholders and decides how the firm is governed. Corporations are legal entities that could sue and be sued. That implies the corporation, not the business owners, bears legal and financial responsibility.

Corporations are treated as independent taxpayers by the Internal Revenue Service and other taxing agencies. C corporations pay a corporate tax rate that is distinct from, and frequently lower than, individual tax rates.

There are two types of C corporations: publicly traded and privately held. Companies that are publicly traded must offer shares to the public and must publish financial information. Privately held businesses do not.

Shareholders elect a board of directors, which then appoints management to run the business on a daily basis. Members of the board of directors are also members of management in smaller companies.

What is the difference between a C and a S corporation?

A C corporation is taxed because it discloses its own profits and losses on its tax return. With S corporation form, however, those profits and losses are distributed to the owners, who then record them on their own tax returns. On their tax returns, C corporations and limited liability companies (LLCs) can decide to be classified as a subchapter S corporation.

There are various advantages to forming a C corporation.

a. Possibility of raising funds.

b. Insurance against liability

c. The average life expectancy is very high.

The following are some of the drawbacks of forming a C corporation:

a. It is very expensive to incorporate.

b. Regulations and paperwork have increased.

c. Double taxation

Below are some of the procedures to form a C corporation. We advice using an experienced firm to register your corporation, this will save you time and costly mistakes.

1. The following are the actions you must take to incorporate a C corporation:

2. Choose an available business name that complies with your state's corporate naming regulations.

3. Apply for an employment identification number (EIN) or a similar tax identification number.

4. Appoint the C corporation's board of directors.

5. Issue stock to the shareholders

6. Finally, and most important is to create an operating agreement that should be signed by the business owners.