C Corporation Examples: Everything You Need to Know
C corporation examples are types of business entities that have chosen the C corporation (C-Corp) status for structure and for taxation purposes. 3 min read
C corporation examples are types of business entities that have chosen the C corporation (C-Corp) status for structure and for taxation purposes.
What Is a C Corporation?
Business owners have a handful of options when it comes to choosing the perfect business entity structure to fit their company. The basic types are:
C corporations stand out from the other entity types for several reasons. Most notably, for their taxation and potential for massive growth. C-Corps are also treated as a completely separate entity from their owners. They are viewed as individuals in the eyes of the IRS and the government, and therefore, can be involved in lawsuits and form contracts as a company. They also must be taxed.
C-Corps get their name from the fact that their income is taxed under the subchapter C of the IRC (Internal Revenue Code) as an individual entity. This is what leads to the double taxation that C-Corps are known for. Income is taxed at the company level and again as it's collected as dividends by shareholders on their personal taxes.
C corporation owners, also called shareholders, must form a board of directors through shareholder voting to manage the company. These directors, or executives, will be responsible for making the big decisions and upholding company policies found in the bylaws.
Unlike other business entity types, C corporation types can continue to function even if founding shareholders pass away or leave the company.
The C-Corp structure is great for startups with aspirations to grow rapidly and even globally.
Limited Liability in a C Corporation
C corporations offer liability protection to their shareholders in the case of a lawsuit. The company is viewed as a legally separate entity from its owners. Therefore, their personal assets are not at risk if the corporation is sued.
Even though C-Corps promise liability protection, it is technically "limited liability," so there are some circumstances in which this protection, called the corporate veil, does not apply.
The assets of C corporation owners or shareholders can be at risk if:
- A shareholder causes physical harm to another person
- The corporation defaults on a loan or debt that was guaranteed personally by a shareholder
- An owner commits fraud or is involved in an illegal action that causes the corporation or an individual to lose money
- An owner doesn't maintain the appropriate boundaries with the corporation, treating it as his or her own property
- The corporation hasn't been upholding proper formalities, and so the court decides the corporation doesn't actually exist
Most of today's public companies are C-Corps, but they can be complicated to start.
Even though starting a C corporation can be a bit daunting, this particular type of business structure offers many perks. C corporations are less likely to be audited because of their taxation structure, whereas LLCs and sole proprietorships are at a higher risk for audits.
C-Corps enjoy a few tax perks like write-offs for company benefits, such as health plans. If benefits are offered to employees of the corporation, the employee can enjoy them tax-free and the corporation can offer them tax-free.
There are little to no regulations in place for the shareholders of a C corporation. Other entity types allow for a limited number of shareholders and have restrictions, such as all shareholders needing U.S. citizenship, among other requirements. The shareholders of a C-Corp can be individuals who are:
- U.S. citizens
- Other companies
In addition, the corporation can have as many shareholders as it wants.
The buying and selling of stocks in a C-Corp is fairly simple and doesn't affect the livelihood of the business. Even if a founding shareholder sells all of his or her stock, the company continues on through the changing of hands. C corporations can also use stock sales to produce needed capital for company expansion.
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