What Is a C Corporation?

A C Corporation is one of several ways to legally recognize a business for tax, regulatory and official reasons. A C Corp is simply a way to structure ownership of a business, and contrasts with other popular business structures including Limited Liability Companies (LLCs), S Corporations, Sole Proprietorships and others.

Generally, a C Corporation structure is better for larger businesses. This is particularly true if they intend to publicly trade shares, through having an Initial Public Offering, or IPO. A C Corporation is much more attractive to potential investors, including venture capitalists and shareholders because it allows wider ownership of the corporation.

The majority of larger businesses in the United States are structured as C Corporations, although a C Corp could, theoretically, consist of just one person. The information below will help you decide if a C Corporation structure is right for your business.

How Is a C Corporation Formed?

A C Corp, also known as a corporation, is a type of business entity that is formed and regulated on a state level. The corporation is formed by filing “Articles of Incorporation” with the Secretary of State in the state of incorporation. The policies, articles, cost and regulations for forming a C Corp vary from state-to-state.

The corporation is the oldest form of business entity. It has long been a successful way to do business and allows groups of individuals to pool their resources and capital to pursue a common purpose, with their risk limited solely to the amount of stock they own. Although a C Corp is a popular business structure, there are other options for forming businesses in the US

How to Form a C Corporation

If a C Corporation is right for you, here’s how to form one:

1. Choose a legal name for your new business.
2. If the Secretary of State in your state reserves business names, reserve the name.
3. Draft and file your Articles of Incorporation — These should be sent to your Secretary of State.
4. Establish who your initial investors and shareholders are.
5. Create and issue stock certificates to your shareholders.
6. Apply for a business license — You may require licenses from your state, county, and township.
7. Apply for any other certificates you need to conduct business — These can vary from industry to industry.
8. Get an “Employer Identification Number (EIN): from the IRS — You can file online, or complete form SS-4.
9. Apply for any other ID numbers and complete other formalities required by your state and local government agencies.
10. Requirements do vary from one jurisdiction to another, but you will generally need to get ID numbers for the unemployment, disability and other payroll taxes.
11. Appoint a board of directors.
12. Assign other positions in the business as required by law.

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