C-Corporation
Start your C-CorpC-Corporation
A C-Corp offers limited liability protection to its owners while also being able to issue stock, which allows owners to raise capital by selling ownership shares to investors.
A C-Corp offers limited liability protection to its owners while also being able to issue stock, which allows owners to raise capital by selling ownership shares to investors.
C-Corps are often used by large, publicly traded companies, but they can also be beneficial for startup businesses that are looking to raise capital, protect their owners from liability, and establish a separate legal entity. If you are wondering what is a C-Corp or what does a C-Corporation mean, you have come to the right page.
Benefits of a C-Corp
Liability protection
Advantages of creating a C-Corp, unlike a sole proprietorship or general partnership, include a liability shield for your personal assets from your company’s debts and legal liabilities.
Raising capital
C-Corps are the best entity type for raising capital, and when setting up a C-Corporation, it's important to know that they have no limits on the amount of investors or the specific kind of investors to whom they may issue shares.
Tax advantages
C-Corps pay a reduced corporate income tax rate on company profits. If you are forming a subsidiary or know that your company will not be profitable for the foreseeable future, a C-Corp can help you optimize on taxes.
Business credibility
When your business name has the designation “Inc.” at the end, it lets customers and partners know you are a credible business. It shows that you are a registered corporation approved by the Secretary of State to transact business.
Public perception
When forming a C-Corporation, it's worth noting that most large, widely-known companies are organized as C-Corps. Owning a C-Corp tells investors and the public that you are serious about scaling your business and becoming a large company.
Tax planning options
Owners of a C-Corp can elect to be taxed as an S-Corp which passes taxes through to its shareholders directly. When creating a C-Corp, this option provides flexibility in tax planning and optimization.
Business loans
As soon as your C-Corp is formed, you can start to build your business credit history. This will help you access business loans and credit that will help your company grow.
LLC use cases
Suraj started a software business in Washington and wishes to raise capital
The ability to issue unlimited shares to an unrestricted pool of investors makes a C-Corp an attractive option for startup founders seeking to raise capital, like Suraj. Since most startups are not profitable for many years, the double taxation of a C-Corp should not necessarily increase a founder’s tax liability.
Seo-Yun started a MedTech business in Illinois and wishes to join an accelerator
Sophisticated investors that participate in accelerator programs, such as the one Seo-Yun wishes to join, prefer to invest in C-Corps, which offer investors simplified taxation and corporate formalities that protect their investment. Forming a C-Corporation can be a strategic choice, as one of the big advantages of joining an incubator or accelerator is the access to a pool of investors and advisors. If you plan on joining such a program, you should consider forming a C-Corp.
Ana started a subsidiary of her foreign consulting business in Georgia
C-Corps pay a reduced corporate income tax rate on company profits. If you are forming a subsidiary in the US, like Ana, you may want to keep US profits separate from foreign income. In such a case, the corporate taxes levied on a C-Corp may be beneficial over the pass-through taxation of other entity types.
Who should NOT form a C-Corp?
Companies not raising capital
The biggest advantage of a C-Corp is the ability to issue unlimited shares to an unrestricted pool of investors. If you are not planning on raising capital by issuing shares to investors, learning how to start a C-Corporation may not be as beneficial, and a C-Corp may not be the best entity type for your company.
Companies with few owners
Closely-held companies and other companies with only a few owners may want to choose an LLC over a C-Corp. The benefits of unlimited shareholders are likely outweighed by the lack of flexibility, formal requirements, and double taxation.
Your company will be in good company
Start your companyHow much does it cost?
$35 - $300
The filing fees for incorporation vary from state to state, ranging from $35 to $300.
How long does it take?
1 to 21 days.
To form a C-Corp takes between 1 to 21 days, and if you're wondering what is a C-Corporation, this should give you an idea of the formation process. If you have a valid US social security number, the process should not take more than a week in most states. The IRS takes longer to issue EINs to companies owned by foreigners, which may add additional time.
