Incorporation 101: What Is C-Corporation?

What Is a Corporation?

Corporation is a legal form of organization of persons and material resources, chartered by the state, for the purpose of conducting business. Corporation is owned by shareholders, the Board of Directors governs the business, and elected officers manage the day-to-day activities. Corporation must adhere to corporate tax laws and file corporate taxes regularly.

A Corporation, also referred to as Standard Corporation, C-Corporation, or Regular Corporation, may have an unlimited number of shareholders, including foreign citizens, may be public (when shares are offered for sale to the public) or privately held (when shares are not sold to the public). Usually shares of the corporation are held by the founders, board members and private investors, such as venture capitalists, who may or may not sit on the board of directors.

C-Corporation is the most common type of incorporation. C-Corporation is considered to be a for-profit, state-incorporated business. Registration is done with state authorities and must abide by corporate laws in the state where it is incorporated.

Corporation provides protection to its shareholders from the corporation’s liabilities, thus the term “limited liability”. However, C-Corporations also have what is called “double taxation” – first the corporation is taxed on its profits, and then shareholders are taxed on the distributions they receive, such as profit sharing payments or dividends.
To incorporate you will need to register your business name, file a certificate of incorporation or articles of incorporation, and pay a fee. You will also need to draft corporate bylaws and hold a board of director’s meeting.

Why Should I Incorporate?

Incorporating is one of the best ways to protect your personal assets while doing business. Most people choose to incorporate solely for this reason, but its not the only advantage of incorporation.

For example, owning a corporation can save you tax money, allows for a greater business flexibility, reduces your chances to be audited, provides tools for better itemization, and makes raising capital less complicated.

Advantages of Incorporating

  • Limited Liability: A corporation is a legal entity that exists separately from its owners or shareholders. With some exceptions, shareholders are not liable for the debts and obligations of the corporation or from any litigation where the corporation is the defendant. Some form of insurance may still be necessary, but incorporation contributes an added layer of protection (also called “corporate veil”).
  • Tax Savings: Careful planning of your business expenses can result in lower overall tax rates. There are many tax benefits for doing business under incorporation, depending on your business income. Even if your young business becomes quite profitable soon, a corporation is entitled to many deductions otherwise not available to you, resulting in significant tax savings. An example of such tax-deductible expense would be salaries of your employees and yourself.
  • Reduces Likelihood of IRS Examination (Audit): Non-incorporated businesses, particularly of higher gross income levels, are targets of many IRS Audits. Incorporated businesses have a much lower audit rate, even if they have high income levels.
  • Anonymity: Depending on the state where you choose to incorporate in, a corporation can be established in such a way that shareholders/owners remain anonymous. Often same level of anonymity can be provided for officers and directors.
  • Added Credibility: A corporate structure communicates permanence and credibility. Even if its a company with only one stockholder and employee.
  • Easier Access to Capital Funding: With a corporation it is much easier to attract investors through the sale of stock.
  • Easier Transfer of Ownership: Ownership of a corporation may be transferred without substantial disruption of operations through the sale of stock. This way the need for complex legal documentation is reduced.
  • Flexibility of Share Ownership: Owning shares gives you the flexibility needed, among other things, to effectively capitalize your business, or to retain key employees. To further capitalize the business successful C-Corporation can be taken public in a process called Initial Public Offering (IPO). You can also issue stock or stock options to your key employees, “binding” them to the business and thus retaining them (common in hi-tech industry among others).
  • Longevity: The board carries on the corporation, not the owner. That means that a corporation formation can last longer than an owner-based company such as an LLC.

Main Disadvantages of C-Corp.

C-Corporations have certain disadvantages. The main disadvantage is the fact that the profit of a C-Corporation is taxed to the corporation when earned, and the corporation does not get a tax deduction when it distributes dividends to shareholders. Then when dividends are distributed to the shareholders they are taxed again at the shareholder level. This phenomenon is called “double taxation”.

Similarly, when C-Corporation has a loss, its shareholders cannot deduct it from their personal income.

C-Corp. vs. S-Corp. vs. LLC

Other forms of incorporation of business organization include S-Corporation and LLC. Each of those types of entities have certain advantages and disadvantages when compared to the common C-Corporation, but a more detailed comparison between those entities goes beyond the scope of this article.

Alex Zehnbacht is an entrepreneur with over 8 years of experience in start-ups and business consulting and one of the founders of MyUSACorporation.com, an online business dedicated to help entrepreneurs with all their business filing needs. He has helped thousands of clients to incorporate their businesses, form LLC, obtain various business licenses, and much more.

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Business Relationships As They Relate to Corporate America

WHAT TYPE OF CORPORATION DO YOU HAVE?

As we anatomy business relationships, the catechism arises to whether a sole cartel or association is needed. For a analogue purpose, a association is a acknowledged entity, abstracted from its shareholders, created beneath the ascendancy of the legislature. As an entity, a association is amenable for its debts. The shareholders are not amenable for the accumulated debts. Shareholders accident is bound to the bulk of their investment. The buying interests of the association are represented by shares, which are advisedly transferable. Administration ascendancy of a association is centralized in the lath of admiral and admiral acting beneath the administration of the board’s authority. Shareholders about accept the board, but they cannot ascendancy the activities of the lath and accept no adeptness in administration of accumulated business.

Corporations accept audible differences than partnerships. Partnerships are absolute by the Uniform Affiliation Act (UPA). Partnerships are not acknowledged entities, but aggregates of two or added bodies affianced in a business. With corporations, shareholders are bound their investments. In partnerships, anniversary accomplice is accountable to l\unlimited claimed accountability for all debts of the partnership. Know your goals in what you wish and analysis anniversary afore chief on a affiliation or association (refer to my March 2003 commodity in Chiropractic Products “Partnerships”).

A corporation, as a acknowledged commodity admitting the afterlife or affliction of its shareholders can accept a abiding duration. Partnerships are not able to perpetuate. If a association goes bankrupt, any debts owed by the association may, beneath assertive affairs be subordinated to the debtors. This agency the debts would accept to be paid afore the shareholders get any money. This came about in a case (Taylor vs. Standard Gas and Electric Corp.) and is alleged “Deep Rock Doctrine”. Formation or alignment of a association is completed beneath “general accumulated law” or “business law” statutes of the accompaniment in which you are incorporating. Usually a association is organized by the beheading and filing of the “certificate of articles” of assimilation by the being or bodies basic the corporation. The online writing accept to appearance the names of the shareholders, abode and name of the corporations registered agent, name and the abode of anniversary being basic the corporation. Optional accoutrement may include:

1. Purpose of the incorporation

2. Names of lath of admiral and administration powers

3. Par amount of shares or chic of shares.

Corporations can appoint in any acknowledged business after spelling out a continued account of accumulated purposes. Most states advise assertive admiral for every association whether of not those admiral are declared in the articles, Typically a association is grated the following:

1. Purpetual existence

2. To accept the adeptness to sue and be sued

3. Accept a accumulated seal

4. To acquire, hold, actuate of claimed and absolute property

5. Appoint officers

6. Accept and alter by-laws

7. Conduct business in and out of state

8. To accomplish contracts

9. To accomplish donations

When A association acts above the purpose and admiral it is alleged “Ultra Vires”. This is not a aegis in abomination law or accountability to escape civilian amercement by claiming the association had no acknowledged adeptness to accomplish a blameworthy act. This aswell applies to bent liability. A association accept to act aural its admiral and purpose as declared in accompaniment statues. Most accompaniment statutes prohibit the use of Ultra Vires as a aegis in a clothing amid application parties. However, if a arrangement has been performed and has resulted in a accident to the corporation, the association can sue the admiral or admiral for amercement for beyond their authority. If the association refuses to sue, a actor may accompany a acquired suit. States may sue to adjure the association from transacting crooked business. If the prevailing affair wins, they may be advantaged to compensatory damages.

MANAGEMENT AND CONTROL:

Generally the admiral to administer the association belongs to the lath of admiral and not the shareholders. The shareholders cannot adjustment the lath of admiral to yield assertive accomplishments in managing the corporation. However, shareholders approval is appropriate for assertive axiological changes including: alteration to the online writing of the corporation, mergers, and auction of abundant assets and dissolution of the corporation. Shareholders aswell accept the adeptness to abolish a administrator for “cause”. Shareholders aswell accept the appropriate to:

1. Ratify assertive kinds of administration transactions

2. Accept non-binding resolutions

3. Appropriate to accept and alter by-laws

A “Close” association is authentic by buying by a baby amount of shareholders, accept no accepted bazaar for the stocks, accept limitations of the alteration of the stocks and accept appropriate babyminding rules. In this account a abutting association is agnate to a partnership. Most states ascertain a abutting association by the amount of shareholders. Anniversary accompaniment varies as to that number. In California it’s 35 shareholders, in Delaware it’s 30.

DIRECTORS:

Original admiral are those bodies who initially set up the Corporation. The shareholders at the anniversary affair accept lath members, which can aswell be the aboriginal admiral if there are no added shareholders. Once elected, shareholders can alone be removed for “cause”. Could cause may be fraud, dishonesty, etc. Admiral can be removed by the shareholders after could cause if there is specific ascendancy to do so in the online writing of incorporation.

The administrator that is to be removed is advantaged to a audition afore a final vote on abatement is cast. Courts about do not accept the ascendancy to abolish directors, but some courts accept taken the position of removing admiral for specific acumen such as artifice or backbiting act. Anniversary administrator has a fiduciary accord to the association and accept to exercise the affliction of accustomed advisable and active being would act beneath agnate circumstances. Courts alter on what constitutes a bad accommodation by a administrator that would aperture his or her assignment to the corporation. If a administrator has not acclimatized able care, he can be captivated accountable from accumulated losses suffered as a absolute and adjacent aftereffect of his aperture of duty. Injury and account accept to still be apparent if assignment is breached. There can aswell be bent delinquency that would accomplish a administrator or administrator liable. There are a array of types of corporations you can establish. Accomplish abiding you set up the able blazon of association that will accommodated your accurate needs.

The University Arms Race

The accepted debt-driven archetypal of academy apprenticeship is unsustainable.

Students generally accumulate cogent alone debt to appear a four-year college. This has culminated in a nation which has added outstanding apprentice loans than acclaim agenda debt.

Where is the acquirement generated by these charge hikes going? Not to your academy professor! Academy advisers face a shrinking amount of opportunities as tenured positions are replaced by accessory professorships. Instead, above banknote outlays are committed to armamentarium a growing amount of non-academic administrators. Another huge amount goes to armamentarium all-embracing basement projects.

While it is simple to point to the agitative salaries of these flush academy administrators, we should yield affliction to accept that this is alone a evidence of the problem. After all, these administrators are ultimately alone job seekers who, like millions of others, seek the a lot of adorable bacon and benefits.

The absolute botheration is the bold of artfulness colleges and universities play adjoin anniversary other. The anniversary rankings conducted by American universities are a accustomed ability to any ancestors with a college-bound child. Although abounding academy administrators accept decried these rankings, they participate and attempt in them nonetheless. Abounding colleges aim to activate approaching growth, and to do this, added barrio have to be congenital and added administrators assassin to baby-sit those efforts.

These accomplishments absorb both the bookish and sports operations on campus. If the flagship university of a accompaniment arrangement builds a medical school, it is not abnormal for a second-tier academy in the aforementioned arrangement to assemble their own medical academy – all with the ambition to “stay competitive.” If a clandestine university seeks to body a digital campus in China, a associate academy will anon breach arena on a campus in South Korea.

Huge projects, acute huge budgets, acute added administrators to baby-sit them, has become the barometer in academy education. Colleges and universities are affianced in a zero-sum bold area above bookish and able-bodied accomplishment is the aim. This is why academy is so expensive.

The academy sports accoutrements chase demography on campus has been bright for abounding years. Although billed as revenue-generating by supporters, too generally the catechism of whether a academy should even host semi-pro able-bodied programs goes unasked. As Bill Friday, above admiral of the University of North Carolina arrangement already said: “We are aggravating to blanket an ball industry on top of an bookish structure, and it will not work. It has never worked.”

Dazzled by these awe-inspiring undertakings, abounding top academy graduates by itself approach to them. As a result, their academy best is generally apprenticed added by perceived authority at accessory a “top bank school” instead of a academy that ability be a bigger fit for alone goals.

While the aggressive spirit amid universities is absurd to anytime abandon completely, conceivably the aim of that antagonism can be redirected. Instead of absorption on “prestige-builders” like new accessories and high-octane sports teams, universities can yield the adverse tact: serve added acceptance by accouterment a cheaper academy education. Through the use of ambit apprenticeship and added non-traditional apprenticeship methods, the university can abstain abounding of the basic expenditures that ammunition the charge for academy revenues.

The age of huge expenditures is now bearing abbreviating returns. What does action a different amount to the bazaar is lower charge for students. The time has appear for universities to breach the aeon of bold added debt to pay off accomplished debt. The focus have to acknowledgment to educational superior instead of perceptions of prestige.

5 Best Places in the US to Move to for a Family

Moving to a bigger abode to accession a ancestors is one of the a lot of accepted affidavit for alteration in the US. As the time comes for the kids to go to academy or college, parents are anxious to acquisition abundant accessories and educational opportunities.

Below is our alternative of the best family-friendly US cities.

  1. Irvine, California

    Irvine is appropriately accepted as one of the safest and cleanest cities in the US. Amid abutting to both Los Angeles and San Diego, it offers baronial schools and colleges like University of California Irvine (UCI), Irvine Valley College, Concordia University, the Orange County Centermost of the University of Southern California (USC) and more. There are aswell campuses of University of La Verne, California State University Fullerton (CSUF) and Pepperdine University. Alfresco activities, arcade venues and opportunities for a cultural affairs abound.

  2. Bellevue, Washington

    If you wish the a lot of eco-friendly ambiance for your children, Bellevue is a admirable option. Even more, the Bellevue Academy District is the astral one in Washington, D.C. Parents and kids allotment abundant reviews about accessible schools’ curriculum, alfresco activities and educational opportunities. There are aswell lots of advancing bounded businesses and affluence of places to accept a meal, alcohol and a nice time. The neighborhoods are actual affable and assorted and citizens address activity safe here.

  3. Overland Park, Kansas

    With a citizenry of over 180,000, Overland Park is a abundant abode to move to accession a ancestors and accord accouchement an accomplished education. The schools are rated actual top and the Johnson County Central Resource Library is a acceptable abode to accumulate the adolescent minds active with self-development. The city-limits is actual family-friendly while a alive nightlife can be begin in the adjacent Kansas City. Accessible infrastructure, schools and hospitals are well-maintained.

  4. The Woodlands, Texas

    Texas is one of the a lot of accepted US states that added and added humans are allotment to backpack to. The Woodlands is a absurd abode to move to with a family. There are lots of ancestors ball facilities, places to accept a airing and picnic, bike, hike, play golf, skate, bathe and about annihilation abroad you can anticipate of. The city-limits just got its new medical centermost and the business and cultural arena is consistently evolving. The attributes spots are absurd and action a admirable retreat from a active city-limits life.

  5. Naperville, Illinois

    Public schools in Naperville are ranked actual top which is why so abounding families are allotment to backpack here. The city-limits may abridgement agitative ball and nightlife opportunities but for those gluttonous quiet, adequate and safe neighborhoods with absolute apprenticeship opportunities for their children, this feels added like a account than a drawback. Accouchement can appear absurd accessible inferior and top schools which action appropriate basic courses to get them accessible for the college. The neighborhoods are actual safe. The kids can aswell be kept active with abundant cultural contest and festivals traveling on in the city-limits throughout a year. Chicago is amid not far abroad which makes it simple to get admission to any casework the ancestors ability be seeking.