A business structure can be made in many ways according to your choice. At the time of building a company, a lot of things depend on LLC, partnership, and proprietorship. Among all these, a C corporation can be truly useful. It has been observed that C corporation can provide more protection to the company and its owner as well. However, when it comes to this particular type of corporation, then the cost is also quite high. Many things are there to know about a C corporation. Here are some of them-
What is the C Corporation?
C corporation is a unique type of corporation that needs to pay tax as a whole entity. This particular corporation has to pay both state and federal taxes. In addition to that, most of the C corporations are publicly traded organizations. It is one of the most integral parts of such a corporation. In a C corporation both the owners and shareholders need to pay taxes. Where on the other hand, in an S corporation or LLC, a shareholder should only pay taxes when they receive any profit. However, at the time of legal issues or debts, this corporation can give maximum protection to personal assets.
What are the Pros and Cons of C Corporation?
Regardless of any other corporation, C corporation has its advantages and disadvantages. A few of them are-
Pros of C Corporation:
1. Bigger Funds:
In a C corporation, one of the biggest perks is that it can have an unlimited number of shareholders. Thus, when the number of shareholders are increasing, the funds will also be at a large scale. It has been proven that a C corporation can raise more funds and sell more stocks compared to other corporations. This particular thing is a huge advantage of a C corporation.
2. Better Protection:
A C corporation is structured in a way that has the potential to provide more protection to the owner of the entity. The limited liability makes it clear that owners are not personally liable for the business debts. This one advantage has made C corporation much safer for owners. In other corporation structures, there isn’t any benefit like this for the owners. Thus, it has made many things useful for the owners.
3. Longevity:
A C corporation can be demolished easily and it is another perk of this corporation. It has been seen that it can run on perpetually. It doesn’t matter if the ownership changes. A C corporation can run even after that and it is an advantage of it.
Cons of C Corporation:
1. Tax in All the States:
A C corporation is helpful in many ways but one of its biggest disadvantages is that it needs to pay taxes in states it is working in. The amount of taxes for such corporations is quite bigger than other entities. A C corporation has to pay the federal tax and state tax. And its huge amount can cause a little problem for the owners.
2. Double Tax:
Another huge problem of this corporation is double tax. Here, both the owner and shareholders need to pay the tax at a particular time of the year. It doesn’t matter how much profit one makes. Tax always needs to be paid on time in this corporation. However, owners can get the chance to deduct a small amount of it by investing the profit back into the business. It is the only way that can help an owner to save some profit.
C corporation is a particular type of corporation that has both advantages and disadvantages. Thus, build your own business by understanding the facts of different corporations.
