Business Structure: What's a C Corporation?
There are many ways to structure a business, including sole proprietorship, LLC, and even a corporation. A corporation differs significantly from other company structures in that it's viewed as a legal entity that's separate from its owners or management. This type of business can sue or get sued in a court of law (without exposing its individual owners or shareholders to legal ramifications). Just like an independent person, a corporation is subject to federal and state taxes.
But what is a C Corporation and Is it the Best Business Structure?
A C corporation pays its taxes (separate from its owners) as per the subchapter C provisions of the Internal Revenue Code. It differs from an S corporation whose profits and subsequent tax obligations are passed on to individual shareholders or owners.
The owners of a C corporation are its shareholders. These shareholders pass the responsibility of making company decisions and formulating policies to a board of directors whom they elect. In many cases, the state attorney general scrutinizes such a company's financial operations as a requirement of law. Legally, a C corporation is independent, and as such, it continues to exist regardless of the death or change of its ownership. You can observe the information about LLC advantages by following the link.
Likewise, many people seeking to start a company prefer the C corporation structure because its ownership has limited liability. In that case, these shareholders are not financially responsible for debts that the business they own incurs. Plus, the owners do not bear individual legal responsibility for any violations committed by their company. Still, the probability of such a corporation facing a government audit is very small, unlike an LLC or a sole proprietorship.
Additionally, a C corporation is allowed by the law to include the cost of benefits as operational expenses. For instance, medical benefits going to employees may be deducted as business expenditure, exempting them from taxation. These benefits will not be taxed even after being passed on to their recipients.
When it comes to raising capital through public offerings, a Corporation is in the best structure and position to achieving that objective. That's because the business can have as many people as possible buy and own its shares. Such companies attract a large number of investors during their IPOs. Pick out the most interesting info about LLC vs corporation.
As such, do you wish to start a company right now? There are many possible structures for your new business, but a C corporation offers plenty of perks that you won't find in an LLC or sole proprietorship.