How Much Does a C Corp Cost?
The average cost (i.e., legal fees) for a lawyer to form a C Corp for a client is $1560.00 on a flat fee basis according to recent C Corp formation projects on the ContractsCounsel platform across all US states.
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Other fees you should know about for budgeting:
- State filing fees. Government filing fees to form a C Corp vary by state and can range from $50 to $500. For example, filing fees in Delaware are $89.
- Registered agent fees. C Corps are required to have a registered agent, which is a party that is responsible for receiving important communications from the government. Registered agent fees typically range from $100 to $300 per year.
- Franchise tax fees. Some states will charge an annual franchise tax to corporations and can vary based on factors. Delaware charges a franchise tax related to the capital structure of the corporation and California charges a franchise tax as a flat fee ($800 per year). We recommend doing research to understand these fees.
What is a C Corporation?
A C Corp, or C Corporation, is one type of business entity that a business owner can choose when establishing a new company. C Corps are the most common type of corporation in the United States because they offer owners many advantages like unlimited growth potential and tax benefits.
Forming a C Corp requires the drafting and filing of several specific documents and business owners will incur costs when establishing their new corporation. Some documents that need to be drafted and filed to establish a new C Corp include:
It is common for new business owners to hire a corporate lawyer to assist in drafting these important documents and the filing process. When establishing a C Corp, owners can expect to incur filing fees, legal fees, licensing fees, and some tax fees.
How to Form a C Corp
C Corps are fairly easy to form but the process will differ in each state. If you are unfamiliar with your state’s laws and regulations, consult with a knowledgeable attorney to guide you through the process.
To form an C Corp, follow these steps:
- Choose and Register a Name. Your C Corp must have a unique name that is not currently being used. Your company’s name must be registered with the Secretary of State.
- File Articles of Incorporation. Articles of incorporation are documents that describe your business and its purpose. They establish your company as a legally operating business. Articles of incorporation must be filed with the Secretary of State.
- Issue Stocks. After the C Corp has been established, stock certificates must be issued to the initial shareholders making them official owners of the corporation.This is usually done at the first shareholder meeting.
- Licenses and Certificates. Depending on your business type and location, you may need special licenses and certificates to run your corporation. Check with your local state laws to see if this applies to your company.
- Employer Identification Number. You will need an employer identification number or EIN to open a business bank account or hire employees. You can get your EIN through the IRS website.
- Elect a Board of Directors. C Corps must elect a board of directors who oversee the management of the company.
Advantages of a C Corp
C Corps are a popular business entity choice for company owners because they offer several unique advantages that S Corps and LLCs do not.
- Liability Protection. C Corps offer the strongest protection against personal liability for shareholders. Directors, officers, shareholders, and employees are all protected under a C Corp.
- Unlimited Growth Potential. C Corps do not have limitations on the number of shareholders that can be involved in the company or the sale of stock.
- Perpetual Existence. Shareholders can sell and transfer shares to leave the company without effecting the company.
C Corp Taxes
A C Corp is taxed as a corporation separately from the shareholders. A C Corp will pay taxes at the corporate level and then each shareholder will pay taxes on the dividends they received from the corporation.
This is referred to as double taxation. Many corporations file to be taxed as an S Corp to avoid corporate taxes, but there are tax benefits that C Corp shareholders can take advantage of to offset the double taxation.
Some advantages to a C Corp Tax Structure include:
- Potential to Minimize Overall Tax Burden
- Ability to Carry Profits and Losses Forward and Backward
- Option to Accumulate Funds at a Lower Tax Cost
- Salary and Bonus Write Offs
- Fringe Benefits
- Charitable Contributions
- Carry Losses Over Multiple Years
- Less Ownership Restrictions
- Financing
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C Corp Projects
C Corp Formation
C Corp formation requires the drafting and filing of several important documents with the secretary of state. Many companies choose to hire a corporate attorney to ensure the documents are properly drafted and filed to avoid any mistakes and delays.
An attorney experienced in C Corp formation can assist you in drafting your articles of incorporation and corporate bylaws and making sure these documents are filed with the correct office.
Shareholder Agreement Drafting
A shareholder agreement is a legally binding document that outlines the rules and regulations that govern a corporation. This agreement is used to protect the interests of each individual shareholder and establish a fair relationship within the company.
A shareholder agreement will include the rights and obligations of each shareholder, how the shares of the company are sold, how the company will run, and how decisions will be made.
Unlike articles of incorporation which can be changed with a majority vote, a shareholder agreement requires all shareholders to agree to make any changes. For this reason, it is encouraged to hire an experienced corporate lawyer to assist in drafting the shareholder agreement to ensure there are no mistakes and it protects the interests of both the shareholders and the company.
C Corp Formation Cost
C Corp formation costs can include filing fees, legal fees for document drafting and review, and license fees. These fees will vary based on the state.
ContractsCounsel’s marketplace data shows the average C Corp formation costs to be $633 across all states and industries.
Shareholder Agreement Cost
If you hire an attorney to draft or review your shareholder agreement, you will have to pay the attorney’s time and legal services. This will include consultations, drafting the documents, revisions, and communication.
ContractsCounsel’s marketplace data shows the average shareholder agreement cost to be $1,300 across all states and industries.
How Do Lawyers Charge for a C Corp Project?
Corporate lawyers charge for services in various ways, and it depends on each individual law firm. Two common fee structures are hourly rate and flat fee rate.
Hourly Rates for C Corp Projects
When an attorney uses an hourly rate fee structure, they will charge a client a set rate for each hour spent working on a project or case. This fee agreement ensures lawyers are compensated for all time spent working on a particular task.
ContractsCounsel’s marketplace data shows the average hourly rate for a corporate lawyer range from $250 - $400 per hour.
Flat Fee Rates for C Corp Projects
If a lawyer is hired for a specific project like drafting a shareholder agreement, they may choose to bill their client at a flat fee rate. The lawyer will estimate the amount of time to be spent on the project and quote the client a flat rate to be paid upfront.
It is important to make sure the client knows what’s included with the fee before starting the project, because it may not include revisions, communications, or consultations.
ContractsCounsel’s marketplace data shows the average flat fee rate for C Corp projects costs to be $633.
Get Help with a C Corp
Do you need help with a C Corp project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from contract lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.
