Whether you are starting a new business or already own an established company in Chicago, you may want to consider the advantages and disadvantages of the C Corporation business structure. With the numerous regulations tied to C Corporations, it is important to have access to attorneys that understand local regulations to ensure legal compliance and take advantage of the benefits of this business model. Understanding C Corporations in Chicago can help business owners make the most informed decision for their company while also reducing the chance of any legal issues occurring.

C Corporations are a type of business structure that defines a for-profit, federally recognized legal entity. It is owned by one or multiple shareholders and is completely separate and distinct from its owners, meaning that the shareholders of a C Corp are not held personally liable for any debts or legal action the company incurs. This corporate structure has many advantages for business owners looking to maximize their liability protection and tax advantages, but one of the most significant factors is the level of oversight they must follow and the potential taxes they need to pay on their profits.

C Corporations have a few unique characteristics that set them apart from other types of business structures and make them attractive for large and small businesses alike.

Key Benefits of C Corporations

Shareholder Liability Protection: As previously stated, shareholders of C Corporations are not held legally liable for the debts and legal action of the company. This means that shareholders are only liable up to the amount of money they have invested in the business.

Raising Capital: C Corporations are able to raise capital resources by selling small investment instruments called stocks. Along with raising capital, shareholders have the ability to sell, transfer, or offer the stock of the company to investors.

Significant Tax Advantages: With a C Corporation, profits are taxed twice, once as a corporation and secondly as capital gains or dividends to the shareholders. Luckily, the United States presents numerous incentives for small businesses to take advantage of. This includes low corporate tax rates, income splitting opportunities, and tax incentives for research and development to name a few.

Unlimited Shareholders: C Corporations are not bound by the restrictions that may limit other types of business structures. This means that C Corporations are able to have an unlimited number of shareholders, and they can include individuals and institutions.

Key Disadvantages of C Corporations

Double Taxation: C Corporations are subject to double taxation, meaning that the income generated by the C Corporation is subject to corporate taxes and then investors are taxed on their individual returns. Luckily, there are ways to reduce this amount even further, such as claiming deductions and credits.

Increased Formalities: C Corporations are subject to more legal formalities compared to other business structures. These include, but are not limited to, filing annual reports, having shareholders and board of directors meetings, and creating shareholder and director agreements.

Higher Initial Cost: C Corporations may be costly to start compared to other business structures, especially if you are looking to incorporate in multiple states or want legal advice regarding the business.

It is important to consider the pros and cons of this business structure before making a decision. Working with legal counsel familiar with the C Corporation regulations in Chicago is critical for any business owner to ensure that they are not held liable for any misdeeds and maximize their tax advantages. UpCounsel is a great resource for business owners looking to find experienced C Corp attorneys in the Chicago area. Whether you need a one-time consult or an entire freelance legal department, UpCounsel’s talented network of lawyers has you covered. From small businesses to the Fortune 1000, groundbreaking companies of all sizes trust UpCounsel and its attorney community to provide high quality, cost-effective legal services. Moreover, profiles of their online attorneys display client ratings and reviews of recent work, so you can feel confident in your decision.

Topics:

C Corporations,

Business Structure,

Chicago