The C corporation (or “C corp” for short), is a very well recognized corporate structure. When you think of a “corporation”, you’re most likely picturing a business that opted use the C corporation structure. If a company is very large and publicly traded, it has most likely adopted this structure. Understanding every aspect of this structure would be incredibly overwhelming, so we’ve put together a quick primer to help you get a general idea of the basics of the C corp.
Pros and cons
There’s a good reason that so many large and successful companies choose to incorporate under the C corp structure: A C corp allows a business to sell shares of public stock. Another benefit of the C corp is the built-in level of separation between the company and its owners. As a result, the owners enjoy a good deal of protection.
Since a C corp allows for raising of funds from so many venues, the government imposes strict regulations. The main drawback of selecting the C corp as a business structure is that there will be a high standard of accountability. This results in many ongoing compliance requirements that some businesses may find time and resource consuming.
C corporations and their owners are taxed separately from one another, which results in “double taxation”. This means that the corporation’s profits will be taxed at the business level, and then each individual owner will be taxed again on their income stemming from the company.
Quick process overview
First, the new business must officially file its Articles of Incorporation (sometimes known as Certificate of Incorporation) with the chosen state of incorporation. Depending on the state in which you are located, there may also be some state-level fees or taxes that must be filed and paid. After filing, the founders of a C corp must gather and create the framework of the future company. Then, stock must be distributed to shareholders. There may be some state-specific requirements that you must observe during these processes as well.
Once the filing process has been completed, there are many other regulations that a C corp must comply with. These usually include yearly filing of an annual report, creation of written bylaws, and regular shareholder and ownership meetings. Not only must these things happen, their occurrence must also be documented.
Swyft can help!
Does it seem like the C corp structure might be the best fit for your business? The professionals here at Swyft are equipped to guide you through the process. Contact us today!