The Comprehensive Guide to Understanding C-Corp in New York
A C Corporation: Separate Legal Entity from its Owner4 min read
A C Corporation—often called a C corp—is a separate legal entity from its owner, making it distinct and liable apart from its owners. A corporation is not a person, but instead, can be thought of as an entity with its own rights and responsibilities.
Navigating New York’s legal regulations regarding C corp can be daunting for business owners and executives alike. That’s why it’s important to have knowledgeable, experienced counsel to help you understand your options, make an informed decision, and ensure that you comply with the applicable regulations. UpCounsel’s attorney network could be the perfect solution.
UpCounsel’s network of accomplished lawyers have the expertise to address any of your C corp needs. Whether you need an initial consultation or a full-fledged freelance legal department, UpCounsel has you covered. Companies of all sizes trust UpCounsel when they need personalized, high-quality, cost-effective legal services.
In this comprehensive guide, we’ll explain what a C corp is, how they’re different from other business structures, and the regulations they must comply with in New York state.
What is a C Corporation?
A C corp—or C corporation—is one of the traditional business structures used by companies of all sizes and industries. A C corp is defined as an entity that’s separate from its owners, meaning that it will have its own rights, responsibilities, and finances separate from its owners. A C corp is not considered an individual, but rather, a naturally immortal entity.
Any size business can opt to be established as a C corp, and this structure is typically used by larger businesses because it allows them to easily raise capital through the sale of stocks.
There are many advantages that C corps provide. They’re relatively simple to establish, have a wide range of options for business operations, and their owners have limited personal liability. Additionally, C corps are also eligible to deduct employee compensation from its financial tax obligations and can potentially be taxed at a lower rate than its owners.
How is a C Corporation Different from an S Corporation or LLC?
One of the major differences between a C corp and the other two most popular business entities is taxation. A C corp is viewed as a separate entity for tax purposes—this is called a “double taxation”—which means that the business has to pay taxes both on its profits and on its shareholders’ dividends. In contrast, S corps and LLCs are not taxed at the corporate level.
However, New York has a flat corporate tax rate of 6.5%, so the profits of C Corps are only subject to federal tax, leaving the state tax rate relatively low.
Another difference between C corps, S-corps, and LLCs is the number of owners/members a business can have. A C corp can have an unlimited number of shareholders, while an S corp or LLC is limited to only 100 or fewer members.
C Corps are also governed by the C Corporation Laws in New York, while S corps and LLCs are not subject to these regulations.
What New York Regulations Does a C Corp Have to Comply With?
The C Corporations Laws in New York are intended to protect both shareholders and the corporation itself.
The following regulations are specific to C corps in New York:
• A C corp must be governed by a board of directors, and its shareholder participation must comply with the guides provided by the C Corporation Laws.
• All C corporations must have bylaws that outline the responsibilities and duties of its directors in order to comply with the state laws.
• Any C Corps operating in New York must be registered with the state before conducting any business.
• C corps must keep accurate financial records and must adhere to certain requirements in order to remain compliant with the C Corporation Laws.
• Taxation: As previously mentioned, C corps are subject to double taxation, meaning that both the business’s profits and the shareholders’ dividends are taxed.
One additional aspect to consider when operating a C Corp is that it is considered a “person” under New York’s labor laws. This means that C corps are subject to the same labor regulations as any other employer, and must comply with the applicable state and federal labor laws.
The C Corporation formation is great for larger companies that need and want to raise capital easily through the sale of stocks. C corps come with a range of advantages and potential tax deductions. However, it’s important to keep in mind the New York regulations C corps must abide by. Knowing the regulations and laws that apply in New York can help ensure that your business can stay compliant and grow successfully in the long-term.
For help navigating the C Corporation Laws in New York, UpCounsel’s network of experienced attorneys can give you expert advice and comprehensive guidance every step of the way.