C-Corporation

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C-Corporation Overview

A corporation is a type of entity that is formed and regulated on a state level. The corporation is formed by filing Articles of Incorporation with the Secretary of State within the state of incorporation.

Ownership in a corporation is expressed through the issuance of shares while the management of the corporation is governed by a board of directors who are elected by the shareholders..

The board of directors select officers who manage the day to day activities of the corporation. The board of directors also will draft bylaws for the corporation Bylaws are basically written protocols that define the way that the corporation will be governed.

Corporations are required to hold annual meetings for both the shareholders and the board of directors. The annual meetings are held to discuss and decide on important decisions that are faced by the corporation.

Corporations are taxable entities and are subject to federal as well as state and local taxation. Unlike the the Limited Liability Company and the S-Corporation where the income of the company flows through to the individual tax returns of the shareholders or members the corporation is required to file a tax return much in the same way as an individual does. Profits from the corporation can be retained by the corporation to use for the purpose of furthering the corporations business interests or they can be distributed to the shareholders as dividends. The percentage of dividends of that each shareholder is entitled to is directly correlated to the amount of shares that they own. Dividends distributed to the shareholder are also subject to taxation but typically at a much lower rate than ordinary income is, this is where the term “double taxation” often associated with the corporation stem from.

The corporation is the oldest form of business entity and has been historically a successful innovation that has allowed a collective group of individuals to collectively pool their resources and capital to pursue a common purpose their risk limited solely to the amount of stock owned. With that said a standard corporation may not be the best entity choice for everyone in today’s business world. The s-corporation and the limited liability company present many of the same benefits of asset protection provided by the corporation while allowing for less formality and more flexibility in regards to the distribution of ownership.

Faqs

What is a C Corporation?

A C Corporation is a completely separate tax and legal entity from its owners, and owners who work in the business are treated and taxed as employees of the corporation (Note: The "C" in C Corporation refers to a sub chapter of the tax code; C Corporations are one of the most common forms of corporations, and they are frequently referred to generically as corporations).

C Corporations are subject to corporate income taxes separate from the owners, where most other forms of business entity allow for the company profits to "pass-through" to the personal income tax statements of the owners. As such, C Corporations are the most formal business entity and they have greater tax reporting responsibilities than other business entities. C Corporations allow for profits to be retained in the business, if desired, and frequently these profits can be taxed at a lower rate than personal income. C Corporations can also pay out after tax profits to its owners in the form of dividends, but this can also lead to double taxation.

In What State Should I Form my LLC or Corporation?

Unless you plan on having a large, multi-state operation, it is generally best to form your company in the state in which it is located.Generally speaking, most states will expect you to be registered with them if there is substantial ongoing business and/or a physical presence in that state. If you do form your company in a state other than the one in which your company is located, you may ultimately need to register your company as a foreign (out of state) company with your home state, which will subject you to all of the fees, taxes, and regulations of that state.

What are the Differences Between Officers, Directors and Shareholders?

A corporation consists of all three: officers, directors and shareholders. Shareholders are the owners of the corporation and elect the directors. Directors guide and are involved in the fundamental decisions of the corporation on behalf of the shareholders. Officers are selected by the directors and run the day-to-day operations of the corporation. These do not need to be separate people. Any person can fill all three positions. In small businesses, one person can be the only shareholder, the only director, and the only officer.

Are Non-U.S. Residents Allowed to Own a Corporation or LLC?

There are no citizenship or residence requirements for ownership of a C Corporation or an LLC. The S Corporation however does not allow nonresident aliens to be shareholders (owner), but any US citizen or resident alien may be a shareholder (owner). You would, of course, require an in state street address for the state to forward official legal and tax correspondence including service of process, known as the registered agent address, but neither residency nor citizenship is required for ownership of a C Corporation or an LLC.

What is Stock Par Value?

Par value is a nominal dollar amount given to corporate shares. It doesn't necessarily reflect their real value, and is typically set at a low value (i.e. one dollar or one cent). The par value of a share is the minimum price at which it may be sold to shareholders, and the par value must be the same for all shares of the same class. The shares can be sold to the initial shareholders, at par value or more, but the price must be the same for each share. Not all states require a par value. Unless you specify otherwise, QuickCorps will authorize 1500 shares (this is due to the fact that 1500 is easily divisible by 2, 3, 4, 5, 6) with a par value of one cent, or at no par value if not required by your state.

What are Bylaws?

The bylaws of a corporation are an internal document that contains rules for holding corporate meetings and carrying out other formalities according to state corporate laws. Bylaws are not filed with the state.

How Many Shares of Stock will my Corporation Need?

The number of initial shares your corporation is authorized to distribute is specified in the Articles of Incorporation. The actual number is more or less arbitrary, at your discretion. QuickCorps uses a default number of 1500 shares (this is due to the fact that 1500 is easily divisible by 2, 3, 4, 5, 6), with a par value of one cent (if your state requires par value, otherwise no par value will be assigned). Some states charge more to form a corporation with a high number of shares and/or high par value.

Am I Required to Hold Corporate Meetings?

Once you receive the filed Articles of Incorporation, which signifies the formation of the corporation by your state, your corporation will need to hold an organizational meeting of the initial shareholders and directors. At this meeting the directors will typically adopt corporate bylaws, distribute corporation stock to initial shareholders, and appoint corporate officers. Also, in most states, directors must meet at least once a year, as directors typically must be elected (or reelected) each year.

At the annual meeting the board members accept their election to the board, and transact any other necessary business. The date, time, and location of the annual meeting is typically specified in the bylaws. Written notification of the annual meetings is not usually required, but it is probably a good idea. Other regular meetings may be held as spelled out in the bylaws. Special meetings may be called, and it is typically required that directors receive written notice of the date, place, and purpose all special meetings of directors.

NOTE: It is important to observe these formalities and take corporate minutes of the required meetings. Failure to follow these formalities and properly document your meetings (i.e. keeping minutes) can place your corporate status in jeopardy. The necessary record keeping material, sample bylaws, and stock certificates are included in the Customized Corporate Kit provided by QuickCorps.

How is a C Corporation Taxed?

Unlike many other business entities in which the profits pass through to the owners' personal tax return (e.g. LLCs, S Corporations, etc.), the C Corporation is a completely separate taxable entity. The C Corporation pays federal taxes on the net profits (after all expenses, including salaries and bonuses) of the business by filing the 1120 form with the IRS. The after tax profits can be paid out to the owners (shareholders) in the form of dividends, or retained for reinvestment of the business. The first $50,000 of net income is only federally taxed at 15% rate, and the next $25,000 is taxed at a 25% rate. Different states have different rules on how they tax corporations.

How is a Corporation Managed?

A Corporation is managed and run by its directors and officers. The directors are appointed by the shareholders and are responsible for the overall management and corporate governance of the corporation. The directors appoint the officers who are responsible for the day to management and operations of the corporation. The typical officer positions are president, vice-president, treasurer, and secretary, although there can be more and sometimes different titles are used. In most states only one director and one officer is required, and they can usually be the same person.

Advantages

The C-Corporation is governed by the state statutes and legislation written to define it. Every state has its own special provisions, rules and governing agencies assigned to oversee incorporated entities. State filing fees, annual report obligations and tax liabilities vary. It is important that you are familiar with the specific nuances and statutory requirements in your state.

Select a state in the drop down menu to obtain more information about filing for an C-Corporation in your state of incorporation:

Taxation

A traditional corporation, also known as a C Corporation, Is an incorporated entity that is taxed as a separate business entity. Unlike individuals C-Corporations have to file a designated tax form with the IRS which is called IRS Form1120 additionally C-Corporations have their own tax rates. Corporations have the option of retaining their profits and earnings as part of their operating capital; they may also choose to distribute some or all of the profits of the company as dividends, which are distributed to shareholders.

Dividends that are distributed to shareholders are in essence taxed twice. They are taxed first at the corporate level (on the corporation’s Form 1120), and again at the individual level (on the shareholders Form 1040).

Our Process

1

Review Order Details

Every new order is reviewed for accuracy and conformity to state filing guidelines.

2

Name Availability Search

A thorough name search is conducted with the state to ascertain the availability of the company name.

3

Prepare and File Documents

Articles of Incorporation / Organization are prepared and delivered to the governing state agency.

4

Deliver Filed Documents

The filed articles along with any additional services are mailed to the client.

STATE INFORMATION

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