Create a C Corporation Business

C-Corp – A C corporation is ideal for a company that is preparing to “go public” or has investors that prefer C corporations. This entity, like the LLC and S corporation, provides limited liability for its shareholders. Typically, if you think you need a C-Corp, we recommend additional legal and tax consultation.

Types of Corporations (Public vs Closely Held):

• Closely Held Corporations – These corporations have fewer shareholders who typically also act as the board of directors to control the company. Closely held corporation stock, unlike publicly held corporation stock, is not publicly traded, and could be difficult to transfer or sell.
• Publicly Held Corporations – These corporations often have many shareholders but the formal mechanisms for control lies with elected directors, who may or may not be shareholders in the company. Shareholders typically only have control to the extent of director election. This creates a separation of ownership (the shareholders) and control (the management). Company stock is publicly traded making ownership more easily transferrable.

Types of Corporations (C-Corp vs S-Corp):

• A C corporation is a business entity while an S corporation is a business tax designation. A corporation or LLC can elect to be taxed as an S-Corp under Subchapter S of Chapter 1 of the Internal Revenue Code.
• C-Corps are infamous for being “double taxed” on the same source of income; once at the corporation level, and again at the shareholder level. S-Corps have pass-through taxation; income is only taxed at a personal level, not at a corporate level. S-Corps are popular choices for professional service providers (like doctors, lawyers, accountants) as a way to save on some self-employment tax liability.

General Formation Requirements:

1. Formation of a C corporation is accomplished by filling Articles of Incorporation with the Secretary of State (or the state’s equivalent department). The Articles of Incorporation generally include:
   • The company’s name;
   • The class and number of shares of each class that the corporation is authorized to issue;
   • The name, address, and signature of the incorporator(s);
   • The name and address of the registered agent; and
   • The non-refundable state filing fee.
2. A Federal Tax ID number (EIN) is required.
3. Once the corporation has been formed, the Board of Directors may be required (depending on the state) to adopt bylaws, which are the rules that govern the newly formed organization.
   • Bylaws are always recommended regardless of whether or not a state requires them. A corporation’s internal processes often work more smoothly when personalized bylaws are adopted. In many cases, these can help avoid unnecessary future litigation.

Frequently Asked Questions

Q. What is the difference between an LLC, an S-Corp, and a C-Corp?

Q: Selective incorporation definition?

A: Selective incorporation is a constitutional doctrine that ensures that states cannot enact laws that violate the first 10 Amendments, or Bill of Rights, of the United States Constitution. Though a common mistake, the term has nothing to do with business incorporation. The Bill of Rights originally protected the people only from the federal government while states were free to act. Through the 14^th Amendment, most of the Bill of Rights have been incorporated against the states. For example, states may not establish a religion in violation of the 1^st Amendment.