Corporation (Inc.)


What is a Corporation?

Corporations is one of several ways to legally recognize a business in the U.S. The Corporation structure is traditionally better for bigger businesses and more attractive to outside investors because it allows a wider ownership of the corporation through stock. The majority of bigger businesses in the US are typically structured as C-Corporations.

C-Corporation Advantages

  • Limited Protection – Similar to an LLC, Corporation’s liabilities are separate from your personal liabilities.
  • Corporations exists independently of its owners – Where as an LLC only exists for as long as the proprietors or owners are alive and in business.
  • Recognized outside of the United States
  • Higher Credibility – Which helps with doing business with other U.S. Entities.
  • Tax Advantages – There are tax deductible business expenses.
  • Preferred by outside Investors and for IPOs – There is an easier access to funding via the use of stock.

C-Corporation Disadvantages

  • Double taxation (C-Corp) – Revenue will be taxed at the company level and also when dividends are given to shareholders.
  • Additional Rules and Regulations– Corporations traditionally have more government compliance and complex tax rules.
  • No Personal Loss Tax Deduction (C-Corp) – Individual shareholders cannot deduct losses on their personal tax returns.

C-Corporation vs. S-Corporation

S-Corporation (S-Corp) is considered a pass-through entity similar to an LLC, which means the business itself cannot be taxed. Instead, the income will be reported on the owner’s personal tax returns. C-Corporations on the other hand are not pass-through entities. Income will be taxed at the corporate level, and if dividends/profits are distributed to the owners, they will be taxed at the individual level too.

Key Differences:

  • S-Corps are for U.S. Citizens or Permanent residents only.
  • S-Corps can deduct losses on your personal tax returns as it is a pass-thru entity.
  • C-Corps can have an unlimited amount of ownership where the S-Corp can’t have more than 100 shareholders.
  • C-Corps has to pay corporate income tax, S-Corps doesn’t because similar to the LLC it is a pass-through entity.
  • C-Corps has to file taxes quarterly, and S-Corps only has to file once a year.

C-Corporation Requirements

  • Hold an annual general meeting for the shareholders and board of directors – The meeting is used to discuss and decide important information and strategic decisions for the company.
  • Issue shares to the investors as ownership of the company
  • Appoint a Board of Directors
  • Assign certain positions for the company (One person can hold multiple positions)
    1. Officers (President, Secretary and Treasurer) – Responsible for the day to day decisions.
    2. Directors – Responsible for the companies major decisions.
    3. Shareholders – Responsible for approving major decisions and electing the directors.

Should I choose a Corporation or LLC?

For a more detailed discussion or more info about Corporations in the USA feel free to schedule a free no-obligation call with one of our Lawyers or CPAs here