C Corp IRS: Everything You Need to Know
C Corp IRS relationship is important to note when forming a C corp. 3 min read
C Corp IRS
C Corp IRS relationship is important to note when forming a C corp. A C corporation is one of the most common forms of corporation in the United States. When forming a C corp., the IRS requires that certain formalities be followed in order to maintain the business, including the filing of certain forms as part of the corporation’s operating agreement. What Documents Do You Need to File to Form and Maintain a C Corporation?
1. Articles of Incorporation
Once you have selected a name for your business, the next step is to file the “Articles of Incorporation” form with the state where you wish to incorporate. These Articles should include:
• the name of your business;
• the corporation’s address;
• the name of a registered agent;
• the number of shares to be authorized; and
• the names and addresses of the Board of Directors.
Typically written by the corporation’s owner, a corporation’s bylaws lay out the formal structure of the business and prescribe how to proceed with certain processes, such as the procedures relating to annual meetings, amending the bylaws, determining the fiscal year of the corporation, etc. Bylaws can be considered the corporation’s rules and need to be formally adopted.
3. Licenses & Permit Forms
Just like any other business, a corporation must make sure it has all of the proper licenses and permits it needs to legally operate in the state. Each state requires different licenses and permits, but generally, a corporation must have a general business license, health permits, zoning permits, etc.
4. Annual Reports
An annual report describes in detail the corporation’s activities for the past year and must be filed with the respective state. The annual report typically includes information such as the names of the Directors and officers, and information about the financial status of the corporation. The annual report filed with the state is separate and distinct from the annual report required by the Securities and Exchange Commission (SEC).
5. Shareholder Meeting Minutes
Corporations are required to holder shareholder meetings on a yearly basis. At these meetings, it is the responsibility of someone at the meeting to record the minutes. The minutes do not necessarily have to list all of the meeting’s discussions, but must lay out generally the meeting’s agenda, who was present and any actions that require a vote.
Failure to fill out and submit any of these forms in a timely manner can result in a lapse in your corporation’s registration. The penalties can be severe, and can range from steep fines to an inability to conduct business. What Tax Documents Does a Corporation Need to File? Corporations typically have to file its taxes on a quarterly (3 month) basis. One of the benefits of incorporating your business is due to the tax benefits. The corporate tax rate for a corporation’s income is lower than the personal income rate. There are also a number of deductions that a corporation has available to it, such as rent, officer compensation, employee benefit plans, and charitable donations.
However, the corporation must also pay other forms of taxes besides income, such as state, medical, unemployment, social security, Medicare and franchise.
A franchise tax is a state-based tax and is required to do business in any given state. The amount of franchise taxes a corporation will have to pay depends on what state it is incorporated in and in what state(s) the corporation does business in. It is generally good advice to incorporate in the owner’s home state, especially if the home state is also where you will be doing business. A corporation can avoid paying a franchise tax if it is both incorporated and doing business in the same state. However, if a corporation does business in multiple states, it might be best to incorporate in business-friendly states, such as Delaware.
Here are some of the forms that a corporation will need to file:
• Form 1120: This short form allows a corporation to take care of its taxes with the Internal Revenue Service (IRS). Corporations with assets that exceed $10 million and/or file more than 250 tax returns each year must fill out this form.
• W-2 and W-3: These forms are where a corporation reports its wages and other forms of income, as well as any employees’ social security or Medicare taxes.
A full list of required forms can be found on the IRS’s website.
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