When you choose to start a business, you have several options of how to set up the organization. C-Corporation, often referred to as a C-Corp, is one option that has many non-tax benefits. It also helps the organization by going public and being able to raise the investment.
How it Works
If you are planning to begin a C-Corp organization, you can approach the office of the secretary of state. There, you can find the forms and list of fees that you need to pay when you file for a C-Corp. You can get all necessary information regarding C-Corp from here.
You also have numerous companies that help you in filing up the C-Corp, but they require a fee. It is advisable that you proceed through the secretary of state's office because it is easier. If necessary, you can seek your lawyer's help.
Organizations should begin to think about forming a C-Corp based on the amount of tax they pay. The C-Corps will be taxed only for their earnings. In other words, the organization pays taxes only for the profits. Companies that earn less will pay fewer taxes than the companies that earn more.
The company's shares will be owned by many and all of them receive a share of the profit. Thereby, all of them will be taxed on the amount that they receive from the company. The money paid out as salary, dividend, or expenses will not be taxed. The owner of the C-Corp can reduce the tax amount considerably by taking a huge amount as salary because that amount will not be considered as part of the profit. The C-Corp organization is a separate business entity and none of the shareholders will be liable for any of the debts accrued.
Registering a C-Corp is much costlier than forming a sole proprietorship or partnership. Practically forming a sole proprietorship or a partnership has no cost associated with them. The cost for registering a C-Corp depends on the state's fee schedule. You will have to pay several other fees in addition to the basic registration fee. Initial or new registration would cost you more.
There are different ways of forming a C-Corp. You can either acquire an existing company and make it a C-Corp or form a corporation from the outset. Many companies initially start out as sole proprietorships, partnerships, or as limited liability companies. People generally form C-Corp for easy selling of the company's shares to the shareholders. The fee associated with turning an existing company to C-Corp is the same as new registration of a new C-Corp.