When an executive in Dallas, Texas is considering starting a business, one of the first questions is often “Should I form a C-Corp or an LLC?” C-Corps have certain benefits over LLCs, such as limited liability protection and the ability to raise capital, but they also come with certain drawbacks, like inevitably higher taxes. In order to make an informed decision that is tailored to the executive’s unique business needs, it is important for them to seek counsel from a knowledgeable business lawyer that understands the nuances of the local regulations.

What is a C-Corp?

A C-Corp is a corporate entity that is formed in a state and is treated as a separate legal entity from its owners. This means that the liabilities of the C-Corp are separate from the liabilities of its owners, meaning the owners will not be personally liable for the debts and actions of the company, unless certain conditions are met. Due to its structure, a C-Corp is able to issue stock, and therefore is able to raise large sums of money relatively quickly which can be beneficial for businesses that are seeking to grow quickly.

Tax Implications of Forming a C-Corp

While the limited liability and potential to raise large sums of money quickly can be a major benefit to forming a C-Corp, there are also significant tax implications that must be taken into account. Most notably, C-Corps are subject to double taxation, meaning that income is taxed both when it is earned as corporate income, as well as when it is distributed to the owners as dividends. Additionally, the corporate income tax rate is usually higher than the individual tax rate, so it is important for the executive to be aware of this extra burden before attempting to form a C-Corp.

Funding Considerations for a C-Corp

Due to the ability to issue stock and raise capital for a C-Corp, founders who decide to go the C-Corp route most likely will have to decide what type of capital to raise and from whom. Generally speaking, if a business is more concerned with raising a large amount of capital quickly, it could potentially use venture capital funds to do so, while if the founders are looking for an infusion of cash with fewer strings attached, they could go the route of using private equity investors or angel investors. No matter which route the executives choose, it should be done in consultation with qualified professionals familiar with the details of both types of financing to maximize the chances of success and avoid any potential pitfall.

Finding Qualified Legal Support

When it comes to forming a C-Corp, or for any legal matter related to business, it is important to find legal counsel that understands the nuances of local regulations. It can be challenging to navigate the landscape of attorneys and find the best ones for the task, but there are online resources such as UpCounsel, which provides access to experienced attorneys who can provide high quality, cost-effective legal services. To make sure they have quality representation that meets their needs, executives can even view profiles of their potential legal team that display ratings and reviews of recent work so it is easier to make informed decisions.

In any business venture, seeking the support of experienced attorneys familiar with local regulations is critical to the success. It is no different when it comes to forming a C-Corp, which is a major decision with a variety of implications. Executives in Dallas who are looking for qualified legal support should look no further than the UpCounsel network, where experienced attorneys will provide high quality, cost-effective legal services.



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