A C corporation is a corporate entity that is taxed separately from its owners (shareholders), in contrast to S Corps and LLCs.
C corporations, the most common type of corporation, are subject to corporate income tax. Profits are taxed at both corporate and personal levels, creating a double taxation situation.
Corporations pay corporate taxes what they make and then distribute the remaining amounts to the shareholders as dividends. Those shareholders are each subject to personal income taxes on what they receive from those dividends. So for owners, they are paying double tax, which sucks but it means they can reinvest profits in the company at a lower corporate tax rate, which is a good thing.
If you want to form a C corporation, the first thing you need to do is often the most difficult: choosing a company name. You then file the articles of incorporation with the Secretary of State according to the laws of the state where you’ll be operating your business.
Shareholders who buy stock in the C-corp become part owners. The stock certificates are issued when the business is created.
Now for the technical details. All C corporations must file Form SS-4 get their employer identification number (EIN). Requirements for this form vary depending on where you are, but as a general rule, you need to be ready to submit state, income, payroll, unemployment, and disability taxes. You also have to establish a board of directors to oversee the corporation as a whole. The point of a board of directors is to have an independently operating body that can make important decisions on behalf of the company without being entrenched in the daily politics of it.
If you have a C-corp, you are required to hold at least one meeting a year where your shareholders and board of directors all meet and hold hands (if they want to). Meeting minutes must be kept so everyone knows what went down in there and can reference it easily as needed. You also have to keep detailed voting records history for each of the directors as well as a list of each owner’s name and how big their stake in the company is. Bylaws on site at your business are also required for a C-corp.
I want to create a C Corporation because it sounds legit, but at the same time, it also sounds like a ton of paperwork. I should hire an incorporation attorney.