Starting a business takes a lot of work, and the decision to incorporate your business is a significant one. If you’re considering incorporating your business, you’ll need to decide what type of corporation you want to form. One of the most popular options is a C corporation. In this blog post, we will explore what a C corporation is, how it works, and its advantages and disadvantages.
What Is a C Corporation?
A C corporation is a legal entity that is separate from its owners, meaning it’s a separate taxpayer.
It’s the most common type of corporation, and it has a unique tax structure. C corporations are owned by shareholders who have limited liability for the corporation’s debts and losses. This means that if the corporation goes bankrupt, the shareholders are not personally responsible for its debts.
One of the significant advantages of a C corporation is that it offers unlimited growth potential. C corporations can issue an unlimited number of stocks, allowing them to raise capital easily from investors.
Additionally, C corporations can exist indefinitely, even when the original owners sell their shares. This means that if you’re planning to pass on the business to your heirs eventually, a C corporation might be the best option.
Another benefit of a C corporation is that it offers significant tax advantages. C corporations have a lower tax rate than individuals or S corporations.
This means that the owners of the corporation are only taxed on their salaries and the profits the corporation generates. Moreover, C corporations can deduct expenses like salaries, bonuses, and employee benefits.
Unfortunately, the tax benefits of a C corporation are not available to small businesses or sole proprietorships.
Despite the advantages of a C corporation, there are also some aspects to consider. For example, unlike S corporations, C corporations also have a double-taxation policy, which means the profits are taxed at the corporate level, and the shareholders are taxed on their dividends. As a result, small business owners do not typically prefer C corporations to avoid the double tax.
Delgado’s Insurance: Taxes Made Easy
At Delgado’s Insurance, we have made it our mission to simplify tax filing while making sure that you stay compliant with all relevant laws and regulations.
We have locations in Riverside, California, and Bloomington, California. Contact us today by telephone (951-361-0084, 909-421-9003), email (mail@delgadosinsurance.com), or through our social media accounts (Facebook, Twitter).
