C Corporation

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C Corporation is any corporation that is not an S Corporation. These “regular” corporations are what you think of when you think of large public companies. They may be owned by a variety of shareholders, have corporate governance through a board of directors, and operate legally separately from the owners or the management. C Corporations file their own tax returns, pay their own taxes, and can also pay dividends to their owners, who are taxed separately from the corporation.

This is the default structure for a new corporation, although most small businesses with limited ownership will elect Subchapter S, or S Corporation status. However, there are a variety of reasons that a business might want to be a C Corporation from day one, especially with plans for outside investment or a need to fully separate the business from the owners.

For startup businesses with investors, it is often necessary to adopt the C Corporation structure because the business will have non-natural owners, preventing you from electioning S-Corp status. This is one of the many areas that startup businesses are different from small businesses.

One of our Advisors and team members, Peter Hubshman, specializes in helping Startups raise capital, and he does a fantastic job explaining why these small corporations need to set up their accounting and financial system like a “real corporation” instead of a mom-and-pop shop to secure financing and opportunities.

Many small CPA firms are ill equipped to support and advice C Corporation clients, because they are not familiar with the tax strategies necessary to tax advantage of this area of the tax code. Unlike pass through entities, these entities need tax planning that is independent of their owners.

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