C Corp: Advantages, Taxes, How to Form
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What is an C Corp?
When you decide to incorporate your business, one option for formation is a C Corp. A C Corp is a common type of corporation in the United States because it allows a business owner unlimited shareholders and attractive tax benefits.
A C Corp is like an S Corp or an LLC in that it offers liability protection for its owners. A C Corp is considered a separate entity from the owners, so an owner’s personal assets are protected in the event of a lawsuit against the company.
The biggest difference between a C Corp and an S Corp or LLC is the tax structure. C Corps are subject to federal corporate taxes which leads to a situation of “double taxing”. This may make a C Corp sound unappealing, however, C Corps also benefit from other tax advantages that are not available to S Corps or LLCs, such as the ability to carry profits and losses forward and backwards, which can help offset income in other years.
A C Corp must follow certain requirements although they are far less regulated than an S Corp. Some of these requirements include:
- Election of a board of directors
- At least one meeting per year for the directors and shareholders
- Records of minutes kept at these meetings
- Maintain voting records
- Maintain a list of all owner’s names and ownership percentages
- Have corporate bylaws
- File annual reports, financial disclosure reports, and financial statements
A C Corp, although more complicated and expensive to maintain than an LLC or S Corp, is a great option for businesses that are medium or high risk, businesses that plan on raising funds through stock sales, or a business that wants to eventually go public.
For more information about C Corps, click here.
C Corp Advantages and Disadvantages
C Corps have both advantages and disadvantages for business owners. When you are deciding how to incorporate your business, you may want to meet with a corporate lawyer to help decide which structure suits your needs. It is important to consider all the advantages and disadvantages before making your decision.
Advantages of a C Corp
- Liability Protection: Corporations offer the strongest protection against personal liability for owners. Directors, officers, shareholders, and employees are all protected under a C Corp.
- Unlimited Growth Potential: Unlike an S Corp, there are no limitations on the number of shareholders a C Corp can have. There is also no limit on the sale of stock.
- Perpetual Existence: The owner or shareholders can leave the company without effecting the company
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Disadvantages of a C Corp
- Double Tax: A C Corp, unlike an S Corp, is taxed as a corporation. This means it is subject to federal taxes as a corporation and then shareholders must pay taxes again on dividends
- Expensive Fees: There are numerous expensive fees that go along with the formation of a C Corp. This can be burdensome for a new business.
- No Deduction of Corporate Losses: Shareholders in a C Corp cannot deduct losses from their personal tax returns like shareholders of an S Corp.
For more help with choosing a business structure, read this article.
How is a C Corp Taxed?
A C Corp is taxed as a corporation and is completely separate from its owners in the eyes of the IRS. A C Corp first pays taxes at the corporate level and then each shareholder will be required to pay taxes on the dividends they received from the corporation at a personal level.
This form of double taxation is often looked at in an unfavorable light, however owners of a C Corp can take advantage of many tax benefits to offset this double tax and lower their tax burden.
Some advantages to a C Corp Tax Structure include:
- Potential to Minimize Overall Tax Burden: Business owners can opt to only take a salary rather than taking a dividend because salaries are not taxed at a corporate rate
- Ability to Carry Profits and Losses Forward and Backward: C Corps have flexibility in determining their fiscal year. This allows shareholders to shift income between different years and decide when to pay taxes on bonuses or when to take a loss.
- Option to Accumulate Funds at a Lower Tax Cost: C Corps allow shareholders to retain income within the company because profits from a C Corp do not appear on a shareholder’s personal tax return.
- Salary and Bonus Write Offs: Unlike an S Corp, the shareholders of C Corps can act as employees in the corporation and take a salary. This allows the corporation to deduct these salaries as payroll taxes. Essentially, the C Corp can pay their employees to offset any taxable profits. This allows shareholders to avoid the double tax.
- Fringe Benefits: Fringe benefits allow a C Corp to take advantage of many large tax write-offs. The only stipulation is that the company must offer the same benefit to all employees. Some benefits eligible for write-offs include medical reimbursement plans, long term care, and disability insurance.
- Charitable Contributions: C Corps can deduct any charitable contributions from their taxes as long as the contribution is no more than 10% of their taxable income.
- Carry Losses Over Multiple Years: C Corps can take more operating losses than an LLC or S Corp with less scrutiny from the IRS. This is beneficial for new, growing companies.
- Less Ownership Restrictions: While an S Corp is subject to many strict regulations set forth by the IRS, C Corp owners benefit from more flexibility and less restrictions. A C Corp can have unlimited owners, including foreign owners, and can have more than one class of stock.
- Financing: Because C Corps are more flexible and less restrictive than an S Corp, they are more appealing for venture capitalists to invest in.
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C Corp vs. S Corp
A C Corp and an S Corp are both types of corporations and are very similar in how they are formed and run. Both corporations require a board of directors, corporate bylaws, annual meetings, and record of minutes. Both types of corporations protect their owners from personal liability and allow the sale of stock.
The two biggest differences between a C Corp and an S Corp are the tax structure and the restrictions that each corporation is subject to.
S Corps are pass-through entities so profits and losses flow through the company and are reported on the individual tax returns of the owners. In a C Corp, the business and the owners are treated as separate entities. A C Corp is subject to both corporate taxes and then owners are again taxed on dividends they received.
C Corps benefit from less restrictions than an S Corp including more flexibility with ownership regulations and stock options. Less restrictions allow a C Corp more growth potential than an S Corp. For example, an S Corp is limited to 100 shareholders that must be US citizens or permanent residents while a C Corp has no limit on shareholders, and they can be from anywhere.
Read this article to learn more about the characteristics of a C Corp.
Forming a C Corp
After you have decided to incorporate your business and you have chosen a C Corp as your business structure, you can follow these steps to form your C Corp:
- Choose and Register a Name : You must choose a name that is not currently being used and register your name with the Secretary of State.
- File Articles of Incorporation: Articles of incorporation must be filed with the Secretary of State and each state has different rules and filing procedures for this document.
- Issue Stock: Upon the creation of the business, stock certificates must be issued to the initial shareholders making them official owners of the corporation.
- Licenses and Certificates: Depending on your business and which state you are located; 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: Every corporation, S Corps included, must elect a board of directors who oversee the management of the company.
If you would like more information about forming a C Corp, click here.
Get Help Creating a C Corp
Do you have questions about forming an C Corp and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from corporate lawyers who specialize in C Corp formation.
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Meet some of our C Corp Lawyers
Samuel R.
My career interests are to practice Transactional Corporate Law, including Business Start Up, as well as Real Estate Law, Estate Planning Law, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I currently serve as General Counsel for a bioengineering company. I handle everything from their Business Transactional Agreements, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing expert specialized legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I was selected to the Super Lawyers Southwest Rising Stars list for 2024 - 2026. Each year no more than 2.5% of the attorneys in Arizona and New Mexico are selected to the Rising Stars. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, and also trademark registration and licensing.
"Everything went very quick, I am very satisfied with the results."
Daehoon P.
Daehoon P.
Corporate, M&A & Securities Lawyer | Managing Attorney, DP Counsel PLLC Practice Areas: Business Formation | Commercial Contracts | Contract Drafting & Review | Mergers & Acquisitions | Venture Capital | Securities Offerings | Franchise Law | Employment & Equity Compensation | Intellectual Property | Cross-Border Transactions About/Bio: I represent companies, investors, and fund sponsors in corporate transactions, commercial contracting, and private securities matters, from entity formation and early-stage financings to acquisitions, exits, and ongoing strategic counsel. As Managing Attorney of DP Counsel PLLC, I help clients structure transactions clearly, allocate risk thoughtfully, and move deals forward with documentation that is practical, enforceable, and aligned with business objectives. My practice includes both day-to-day commercial matters and more complex transactional work, including venture financings, private offerings, M&A deals, fund-related documents, and cross-border structuring. What I Do: Corporate & Commercial • Entity formation and structuring for corporations, LLCs, and limited partnerships • Operating agreements, shareholder agreements, and governance documents • Commercial contract drafting, review, and negotiation • Vendor, distribution, manufacturing, SaaS, and licensing agreements • Employment, consulting, confidentiality, and equity compensation agreements • Outside general counsel support for growing companies Securities & Private Capital • Private offerings under Regulation D and Regulation S • Private placement memoranda, subscription agreements, and investor documents • SAFE, convertible note, and priced equity financings • Venture capital and private fund formation matters • Fund governing documents and offering document packages • Securities law analysis for private capital raising transactions Mergers & Acquisitions • Letters of intent and term sheets • Stock purchase, asset purchase, and merger agreements • Due diligence coordination and transaction support • Disclosure schedules, closing documents, and post-closing matters • Earnouts, rollover equity, indemnity structures, and related deal terms • HSR, CFIUS, and related regulatory issue spotting for qualifying transactions Digital Assets & Emerging Technologies • Federal-law digital asset and token securities analysis • Entity structuring for blockchain and Web3 ventures • Digital asset fund and operating structures • AML/KYC documentation support and regulatory issue spotting Franchising • Franchise Disclosure Documents (FDDs) • Franchise agreements • Master franchise and area development agreements • Franchise structuring and registration coordination Real Estate Transactions • Commercial real estate acquisitions and dispositions • Real estate joint ventures and syndications • Commercial lease drafting and negotiation • Real estate investment structures and related offering documents Cross-Border & International • U.S. market entry and entity structuring for international clients • Delaware and multi-entity holding structures • Cross-border transaction planning and documentation • Coordination with foreign counsel and tax advisors on cross-border matters Why Clients Hire Me: • Big-law-level drafting with boutique responsiveness • Practical, business-focused advice grounded in execution reality • Clear scoping and transparent fee arrangements • Experience across financings, acquisitions, fund formations, and cross-border transactions Typical Projects: • Contract drafting and negotiation • Entity formation and governance packages • Private offering document suites • Venture financing documentation • M&A transactions from LOI through closing • Fractional or outside general counsel support Industries Technology | SaaS | FinTech | Digital Assets | E-commerce | Healthcare | Real Estate | Food & Beverage | Professional Services
"Highly professional and efficient. The attorney handled my Terms of Service review expertly and provided exceptionally quick, clear responses to all of my clarification questions. I highly recommend their services."
Rene H.
I am an attorney licensed in both California and Mexico. I offer a unique blend of 14 years of legal expertise that bridges the gap between diverse legal landscapes. My background is enriched by significant roles as in-house counsel for global powerhouses such as Anheuser-Busch, Campari Group, and Grupo Lala, alongside contributions to Tier 1 law firms. I specialize in navigating the complexities of two pivotal areas: AI/Tech Innovation: With a profound grasp of both cutting-edge transformer models and foundational machine learning technologies, I am your go-to advisor for integrating these advancements into your business. Whether it's B2B or B2C applications, I ensure that your company harnesses the power of AI in a manner that's not only enterprise-friendly but also fully compliant with regulatory standards. Cross-Border Excellence: My expertise extends beyond borders, with over a decade of experience facilitating cross-border operations for companies in more than 20 countries. I am particularly adept at enhancing US-Mexico operations, ensuring seamless and efficient business transactions across these territories.
"Rene gets the job done in an effective and efficient manner. Rene understood the goals of the project I hired him for; delivered and reached those goals with his knowledge and experience; as well as consistently following up on time, and is pleasant to work with."
Jim B.
Since 2002, when I first received my law license and began practicing in criminal litigation, I have dedicated myself to providing competent and impassioned legal representation to my clients. Transitioning into business and intellectual property law and serving the Oregon community under the banner of INTELLEQUITY since 2016, I embarked on a mission to offer an unparalleled level of personalized legal guidance that empowers my clients through understanding, support, and legal mastery. As a seasoned attorney, I recognize that behind every case is a person with a distinct set of emotions, aspirations, and challenges. This is why my approach to legal services is not just about cases and statutes; it's about people and their lives. Whether it's navigating the intricacies of business law or safeguarding your intellectual property, I'm here to provide more than just professional counsel—I offer a compassionate, personalized approach to every case. This means keeping you well-informed at every step, empowering you with in-depth understanding, and steering you towards decisions that are legally sound and, more importantly, right for you.
"Great person to work with. He helped gain a better understanding of my own business."
Dolan W.
You need a lawyer who's more than just knowledgeable – you need someone who's on your side. That's where I come in. I'll be there every step of the way, offering clear communication and proactive solutions. Whether you're starting a business or navigating a complex legal matter, I'll help you make informed decisions and achieve your goals. I also have drafted many templates to save you money. Just use this link - https://www.contractscounsel.com/client/lawyer-profile/3764#Templates Why Choose Me? I put you first I'm proactive I'm efficient I'm accessible
"Dolan is awesome! So responsive, quick, and knowledgeable. He really understood my project and explained everything."
September 3, 2024
Dennis S.
Dennis Sponer co-founded ScripNet, a uniquely designed Pharmacy Benefit Management (PBM) company in 1997. After serving as In-House Counsel for one of Las Vegas’ largest healthcare conglomerates, Dennis devised a payor based technological solution to the challenge of pharmaceutical payment and remittance. As one of the first workers’ compensation specific Pharmacy Benefit Managers in the industry, Dennis pushed the boundaries of what a PBM can do. ScripNet was a three-time winner of the Inc. 500 and was named to the Inc. 5000 numerous times thereafter. Clients of ScripNet included some of the largest carriers, governmental entities, and self-insured employers in the nation, including FedEx, Starbucks, Lockheed Martin, the Cities of Dallas, Atlanta and Philadelphia as well as the State of Texas and the State of Nevada. After fifteen years of exceptional growth and class leading industry recognition, ScripNet was acquired in 2012 by Optum Healthcare Solutions. After selling ScripNet, Dennis served as Executive Vice President for the acquiring company and was successful in integrating ScripNet into the larger entity. His latest venture, HSARx, was a consumer facing Pharmacy Benefit Manager focused on the owners of health savings accounts. He sold HSARx to SwiftScript in October of 2023. Dennis obtained his Juris Doctorate from Brigham Young University where he served as Note and Comment Editor of the Law Review. He then obtained his Master of Laws in Taxation (L.L.M.) from the University of San Diego. After selling ScripNet, Dennis returned to school to earn his TRIUM MBA, the program jointly administered by New York University's Stern School of Business, the London School of Economics and HEC Paris. Dennis is a member of the 1999 Leadership Las Vegas graduating class, was named by InBusiness Las Vegas to its annual Top 40 Under 40 list, is a graduate of MIT's prestigious Birthing of Giants program and holds a certificate in full stack development from MIT. Dennis is licensed as an attorney in California and Nevada and is a past President of the Las Vegas Chapter of the Entrepreneurs' Organization. He serves on the Southern Utah University School of Business National Advisory Board, the SUU Entrepreneur Leadership Council and the UNLV College of Liberal Arts Board. Through his consultancy, SRX Advisors, Dennis serves as an advisor and legal counsel to various startups, health care technology and artificial intelligence firms.
September 4, 2024
Jonathan W.
Jonathan Wright offers 30+ years of legal and business expertise to clients seeking a trusted advisor. His experience as a CEO and General Counsel for tech, healthcare, and biotech companies enables him to provide seasoned guidance on complex contracts, strategic agreements, and business transactions. Whether you're starting a company, navigating financings, or handling day-to-day corporate legal needs, Jonathan offers valuable insights and support.
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Dissolution
C Corp
Massachusetts
What are the legal steps and requirements for dissolving a C-Corp?
I am the CEO of a technology startup that has been operating as a C-Corporation for the past five years. Due to financial challenges and a significant decrease in revenue, our board of directors and shareholders have unanimously decided to dissolve the company. However, as a non-legal professional, I am not familiar with the legal process and requirements for dissolving a C-Corp, including notifying the IRS, settling outstanding debts and obligations, filing dissolution documents, and distributing assets to shareholders. I would greatly appreciate your guidance on the legal steps involved and any potential pitfalls or issues we should be aware of during the dissolution process.
Richard G.
Dissolving a corporation in Massachusetts involves a series of steps to ensure that the process is legally compliant and that the corporation’s affairs are properly settled. Here’s a general outline of some of the process, but you should consult with a corporate attorney/business attorney such as myself: 1. Board Approval - **Board of Directors’ Resolution:** The board of directors must approve a resolution to dissolve the corporation. This resolution should outline the reasons for dissolution and the plan for winding up the corporation's affairs. 2. Shareholder Approval - **Shareholder Meeting:** Hold a meeting of the shareholders to vote on the dissolution. In most cases, a majority of the shareholders must approve the dissolution, although the corporation’s bylaws or articles of incorporation might require a higher percentage. 3. File Articles of Dissolution - **Prepare and File:** File the Articles of Dissolution (Form DSF 28) with the Massachusetts Secretary of the Commonwealth’s office. You can download the form from the Secretary of State's website or file it online. - **Fee:** There is a filing fee associated with this form. 4. Settle Debts and Obligations - **Pay Debts:** Ensure that all the corporation’s debts and obligations are paid. This includes taxes, loans, and other liabilities. - **Distribute Assets:** After settling debts, distribute any remaining assets to shareholders according to their ownership interests. 5. File Final Tax Returns - **Federal and State Tax Returns:** File final federal and state tax returns for the corporation. Indicate that these are the final returns and that the corporation is dissolving. - **Clearances:** Obtain any necessary clearances from state tax authorities, if applicable. 6. Cancel Permits and Licenses - **Cancel Business Licenses:** Cancel any business licenses, permits, or registrations that the corporation holds. ### - **Notice to Creditors:** Notify creditors of the dissolution. This can help to ensure that all claims are resolved before finalizing the dissolution. 8. **Close Bank Accounts** - **Close Accounts:** Close the corporation’s bank accounts and settle any remaining transactions. 9. **Document Retention** - **Keep Records:** Retain the corporation’s records for a period of time as required by law, typically several years. Additional Notes: Legal and Financial Advice: It’s often advisable to consult with a legal or financial advisor to ensure that all aspects of the dissolution are handled properly. Publication: Massachusetts doesn’t generally require publication of dissolution, but local regulations or specific business needs might necessitate it. Completing these steps ensures that the dissolution process is handled smoothly and in compliance with Massachusetts law. Contact me if you have further questions specific to your company as this article is not a complete article.
Acquisitions
C Corp
New York
C corp and exit strategies?
I am the founder of a small C Corp that has been in business for 5 years. We have achieved success and grown significantly since our founding, but I am now considering different exit strategies. I am seeking legal advice about which exit strategies would be best for my C Corp and how to properly implement them.
Michael S.
There are a number of possible exit strategies, including a sale to a third party, a sale to an employee stock ownership plan, and a sale to an employee-owned cooperative corporation. Each of those approaches could be effected through a single transaction, or through multiple installments, or you could maintain some ownership of the business indefinitely. Each appraoch comes with certain relative advantages and disadvantages. Please contact me if you would like to discuss your options in greater detail.
Business
C Corp
Ohio
What are the steps and requirements for forming a C Corporation?
I am currently in the process of starting my own business and I have decided to structure it as a C Corporation. I have done some initial research on C Corp formation, but I am still unsure about the specific steps and requirements involved. I would like to consult with a lawyer to get a clear understanding of the process, including any necessary documents, fees, and legal obligations that come with forming a C Corporation. This information will help me ensure that I am following the correct procedures and meeting all the legal requirements in establishing my business as a C Corporation.
Paul S.
You form a corporation by filing articles of incorporation with the Secretary of State. Then you will need initial board resolutions to authorize various post-incorporation organizational matters, as well as bylaws. You will also need to issue stock to the founders. This is the kind of project I have handled for dozens of clients.
Dissolution
C Corp
New York
Can a C-Corp be dissolved without distributing the remaining assets to the shareholders?
I am a shareholder in a C-Corp that has been struggling financially for several years, and it has become evident that the company is no longer viable. We have explored options for restructuring or selling the business, but it seems that dissolution may be the most appropriate course of action at this point. However, there is disagreement among the shareholders regarding the distribution of the remaining assets, and some are proposing that the assets should not be distributed at all. I am seeking legal advice to understand if it is possible to dissolve the C-Corp without distributing the remaining assets to the shareholders and what implications this may have for the shareholders and the company.
Danny J.
The dissolution of a C-Corp is a complex process governed by state laws and the company's bylaws. While it is generally expected that remaining assets would be distributed to shareholders after satisfying creditors, there are scenarios where this might not occur: 1. Asset distribution may be restricted if there are outstanding debts or legal obligations. 2. Some states allow for alternative distribution methods if specified in the articles of dissolution. 3. In certain cases, assets might be transferred to a trust or another entity for specific purposes. However, the implications of not distributing assets can be significant: - Potential breach of fiduciary duty claims - Tax consequences for the corporation and shareholders - Compliance issues with state corporate laws Given the complexity of your situation and the disagreement among shareholders, it would be prudent to have a thorough legal analysis of your specific circumstances. As an experienced corporate attorney, I could: 1. Review your company's bylaws and financial situation 2. Analyze applicable state laws regarding dissolution 3. Advise on potential legal risks and shareholder rights 4. Guide you through the dissolution process to ensure compliance Feel free to reach out to discuss your situation in more detail and explore the best course of action for your company's dissolution.
Small Business
C Corp
North Carolina
C corp vs. S corp: Which is better?
I am currently starting a new business and am trying to decide which corporate structure is best for my particular situation. I have heard that C corps and S corps have different advantages and disadvantages, so I am looking to get legal advice as to which would be more beneficial for me. I understand that there are many factors to consider, such as taxation, liability, and potential for growth, so I am hoping to get a better understanding of the pros and cons of each structure and which would be the most suitable for my needs.
Nicholas M.
It would be impossible to give you a primer on all of the advantages and disadvantages, but here is a headnote version: C-Corp Pros: Ultimate flexibility with regards to ownership, control, power, etc through the issuance of one or more classes of shares. Cons: Double taxed. You will be taxes as a corporation and as an individual taking a salary from the corporation. S-Corp (this is just a C-Corp electing to be taxed under subchapter S of the IRS code): Pros: Tax advantage for owners (up to 100 people) from not double taxing. Cons: Less flexibility than C-Corp but more granular control than LLC. Depending on the situation, most companies starting out are better off starting an LLC, which has less formalities, and then converting to a S-Corp or C-Corp once they scale and can take advantage. C-Corp, S-Corp, and LLC all have the same level of liability protection if you follow the formalities for formation and maintenance. C-Corps have the most rigor and LLCs have the least. You can also consider LLP and other business structures based on co-owners or other factors that a lawyer can help you evaluate.
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Design and Execute Spinoff
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