A C Corporation (C-Corp) is a standard corporation that allows for an unlimited number of individuals or companies to own a portion of the company by distributing shares of stock. It offers protection to owners, investors, and officers from liability resulting from its actions. If you plan to seek outside funding from venture capitalists (VCs) or angel investors, or envision an ultimate initial public offering (IPO) then a C-Corp is likely the right structure for your company. C-Corps boast a flexible stock structure, which makes it easy to issue different classes of stock, and for investors to use different financial documents, such as convertible notes, SAFEs, warrants, and subordinated debt. It’s also the best structure to raise equity capital through crowdfunding.
C Corporations also allow for maximizing tax deductions for business expenses and benefits. Additionally, they minimize employment taxes since shareholder-employees of C-Corps pay FICA (Social Security and Medicare) taxes only on wages they receive. They’re also attractive to foreign investors (unlike S-Corps, which cannot have any non-resident shareholders). Other strengths include the ease for an investor to exit a C-Corp and that dividends the C-Corp earns from other corporations are largely non-taxable.
