If you ever plan on starting a business that might grow into a huge enterprise someday, you should consider registering as a corporation. Out of all the types of corporations out there, the most popular one is the C-corporation.
In this blog post, we’ll dive deep into what a C-corporation is, how it works, and how it differs from other business entities. Whether you’re starting your own business or just want to learn more about how companies operate, we’re here to help.
What Is a C-Corporation?
A C-corporation is a type of business structure that is separate from its owners or shareholders. It is considered a legal entity that can enter into contracts, own assets, sue or be sued, and pay taxes, among other things.
One of the key features of a C-corporation is that it has an unlimited number of shareholders, which means multiple owners can invest and own parts of the company. Shareholders are not held personally liable for the corporation’s debts or legal issues.
How Does a C-Corporation Work?
A C-corporation is owned by shareholders who elect a board of directors to make decisions on behalf of the company. The board then hires officers, such as a CEO and CFO, to manage the day-to-day operations.
C-corporations follow strict rules and regulations set by the state they are registered in, and they must file annual reports and pay taxes on their income. The corporation also has to hold annual meetings for the shareholders and board of directors.
How Is a C-Corporation Different From Other Business Entities?
C-corporations differ from other business entities in a few key ways. For example, an S-corporation is similar to a C-corporation in that it is a separate legal entity, but it only allows for a limited number of shareholders (up to 100) who must be U.S. citizens or residents. S-corps also avoid double taxation, which C-corps do not.
LLCs (Limited Liability Companies) also separate the business from its owners, but they do not have shareholders or a board of directors. LLCs are not taxed directly, but instead, the income or losses flow through to the owners’ personal tax returns.
What Are the Pros and Cons of a C-Corporation?
One advantage of a C-corporation is the ability to raise capital, as there are no limits on the number of shareholders or the amount of stock that can be issued. This can help the company grow and expand more quickly.
Another advantage is limited liability for shareholders, as they are not personally responsible for the corporation’s debts or legal issues.
One major disadvantage of a C-corporation is the possibility of double taxation, where the corporation is taxed on its income, and then shareholders are taxed again when they receive dividends.
La Senda Enterprises: Bookkeeping and More
From income tax preparation to bookkeeping, at La Senda enterprises we offer a full range of professional services designed to make your life easier.
We are located in Rancho Cucamonga, California, and serve clients all over the Golden State and beyond. Get in touch today by email at info@lasendaenterpriseinc.com or by phone at 909-466-5522.