C-Corporations

The corporation is the stalwart business entity most commonly formed for raising capital and limiting individual liability throughout the world. The corporation is a legally separate “person” which may live forever or be empowered to protect the shareholder from economic harm. It may own assets, sue or be sued, transfer its ownership easily, borrow money, mortgage its assets, and file bankruptcy. A board of directors and corporate officers remove day-to-day management from the hands of the owners (shareholders). Shareholders elect the board at shareholder meetings.

C-CORPORATION GENERAL CHARACTERISTICS

• Separate entity–a corporation is a separate legal entity formed to be a “fictitious legal” person. Easy transfer of ownership and assignment of equity.
• Limited liability–owners (shareholders) are insulated from debts and liabilities of the corporation by state law. Certain provisions must be met.
• Corporate articles–must be filed with the Secretary of State to form the entity.
• Capital generation–may borrow money, issue bonds, sell common and preferred stock, and enter into investment contracts.
• Continuity of life–the entity may live forever without interruption by the death of shareholders, directors, or officers.

C-CORPORATION ADVANTAGES

• Limited liability–no shareholder; officer or director may be held liable for debts of the corporation unless corporate law was breached.
• Capital generation–may sell common or preferred stock, issue bonds, borrow money, mortgage assets, or contract for many types of financing.
• Continuity of life–the entity exists forever so long as corporate regulations are met. No need to wind up operations if an owner or manager dies.
• Ease of ownership transfer–the assets may be sold, transferred, pledged, or mortgaged simply by using stock.
• Centralized management–practical control of business is performed by officers at the direction of the board of directors.

C-CORPORATION DISADVANTAGES

• We believe that corporations have few disadvantages and, virtually none which cannot be easily overcome.

C-CORPORATION TAX IMPLICATIONS

• Read IRS Publication 542 on corporate taxation.
• Corporations file on IRS Form 1120 and report earnings and taxable profit.
• May be subject to estimated tax payments (quarterly). Read IRS Publication 542 and Form 1120-W.
• Must withhold and match employment taxes on any wages paid to its employees.
• Must file for a “Federal Tax Identification Number” using Form SS4.