The Advantages of C Corporations

Forming a C Corporation does have several benefits:

1. A C Corporation has Limited Liability
2. Because a C Corp is a separate legal entity, the liabilities of the business are separate from the liabilities of the directors, investors and shareholders. Generally, the owners of a C Corporation are protected from being liable for the business’s obligations. This does not apply in all cases, for example if corporate funds are misused, there is willful fraud, or if certain rules and regulations are not followed.
3. A C Corporation Exists Independently of its Owners
4. A C Corporation can have “Perpetual Existence” — this is in contrast to sole proprietorship or partnerships where a business only exists for as long as the proprietors or owners are alive and in the business.
5. Ownership of C Corporations Can Be Fluid and Transferred
6. Ownership in a C Corporation is decided by who holds the stocks it issues. These stocks can be bought and sold between investors, and if the company’s shares are publicly traded on a stock exchange, institutions and members of the public can own stock in the company.
7. Ease of Access to Funding Through Issuing Stock
8. If a C Corporation want to raise money, it can hold an “Initial Public Offering (IPO)” where it “goes public” and offers shares for sale on a stock exchange. This can bring significant money into a business. They can also choose to issue shares periodically to raise further funding, although this can dilute the value of existing shares.
9. Enhanced Business or Corporate Credibility
10. Most of the businesses that are household names are C Corporations. Incorporating as a C Corp demonstrates to others that you expect to see significant growth and can enhance the business’s credibility and authority.

The Disadvantages of a C Corporation

A C Corporation does have some disadvantages. Briefly, they are:

1. A different tax structure to other types of businesses.
2. Double taxation for investors when dividends are paid to them.
3. Legal rules, regulations, formalities, and compliance they have to meet.

We go into more detail on understanding C Corporations in our article about understanding them. If you’re interested in starting a C Corporation, our online registration form can help guide you through the process.