What is a C Corporation?
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What is a C Corporation?
2009.04.09
A standard corporation, also known as a C corporation, is the most commonly formed corporate structure in existence. Most major companies (and many smaller companies) are treated as C corporations for Federal income tax purposes.
- Advantages of a C corporation
The owners(shareholders) of a corporation are not personally liable for any business debts, claims, or other liabilities. A corporations existence is considered perpetual, although it can be terminated voluntarily by its owners. Obtaining fringe benefits is another advantage provided through use of a corporation. While these benefits can be provided by all business entities, a corporation allows for a greater range of benefits. Last but not least, corporate tax advantage. The tax rate on corporate income is usually lower than the tax rate on personal income.
- Disadvantages of a C corporation
A corporation unlike an LLC has more extensive record keeping requirements. Corporations typically require more ongoing paperwork than most other business entities. Requirements include holding and documenting annual meetings of shareholders and directors, and keeping the minutes of important corporate meetings. This is required in order to stay in compliance with the law and to maintain a good corporate status. Another disadvantage that comes with a corporation is the double taxation due to dividend payments. A C corporation is taxed on corporate earnings, and again on dividend payments to the shareholder/owners.
- Ownership rules
Most states allow one-shareholder corporations; some require at least two.
- Non US resident facts
There are no citizenship or resident requirements for ownership of a C corporation. The S corporation however does not allow non-residents to be shareholders(owners).
- Bylaws of a C corporation
The bylaws of a corporation is a document that contains the internal rules for holding corporate meetings and carrying out other formalities according to state corporate laws.
- Stock's "par value"
Par Value is a nominal value that is given to shares of a corporation when it is first formed. The par value can be used for different things. Typically it is used to set this nominal price or maybe what's viewed as a minimal price for shares. Par value can also be used to determine franchise taxes in some states. Some states do not require a par value and generally when a state does not, it will not be requested during the formation process.
