A C-Corporation is a powerful tool that can provide tremendous benefits. They provide limited liability to the owners, provide the greatest tax benefits and flexibility in transferring ownership.
A Corporation is owned by its shareholders. Shareholders can be individuals or other entities such as another Corporation, trust or a Limited Liability Company. Although a Corporation usually has more than one owner, it is possible for only one individual to create and own 100 percent of the Corporation.
Corporations must file their own tax return. In most cases, the corporate level of tax is less than the individual rate.
The owners or shareholders of a Corporation cannot be held personally liable for the actions of the business except in the case of outright fraud. If the Corporation is properly established and maintained, the individual shareholders are not personally liable for the losses of the business and creditors may only look to the Corporation and the business assets for payment.
Corporations are legally required to observe corporate formalities. Corporate formalities consist of the holding and documentation of all company meetings, the formal approval of major corporate decisions and the approval of the board of directors and shareholders. Failure to meet these requirements will lead to the disallowance of tax deductions and the asset protection that the Corporation provides. With the Corporate Veil Protection Service you can enjoy all the benefits a Corporation provides, without the hassles and headaches of doing all the paperwork yourself.
The following table provides a look at the LLC vs Corporation, and LLC vs S-Corporation. Tax comparisons can be found in the lower portion of the table.
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C-CORPORATIONView the Details Incorporate Now |
LLCView the Details Incorporate Now |
S-CORPORATIONView the Details Incorporate Now |
|---|---|---|---|
| Type of Organization |
Stock, there may be different classes. |
Membership interests. There may be different classes of membership. | One class of stock. Which may be voting or non-voting. |
| Eligible Owners | No restrictions. | No restrictions. | 100 shareholder limit. No non-individual and no non-resident alien shareholders. |
| Management | Managed by director(s) and officer(s). | Two Management Types - Managed by Manager - Managed by Members |
Managed by director(s) and officer(s). |
| Allocations of Ownership | None. Dividends must be paid based upon stock ownership. | Permitted if the allocations have substantial economic effect. | None. Income, gain, and loss pass-through to the shareholders based on the percentage of shares owned. |
| Liability Protection | There is limited liability for shareholders, officers and directors. | There is limited liability for members and managers (if applicable) | There is limited liability for shareholders, officers and directors. |
| Duration | Perpetual | Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue. | Perpetual |
| Transfer of Ownership | Shares freely transferred. | There may be restrictions under certain state laws. | Shares can be transferred only to eligible S-corporation shareholders |
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