C Corporations
Kevin Barlow, Madi Buckley, Erika
Houseknecht, Ali Barahona
What is a corporation
A corporation is defined as an individual legal entity that has undergone
the incorporation process by either direct legislation or by legal registration.
Corporations organize business as either profit-seeking or non-profit
business. Registered corporations are owned by shareholder who possess
certain liabilities that are limited to their investment. Despite their ownership,
shareholders elect a board of directors to control the corporation. According
to law, corporations are considered to be legal persons and hold many of
the same rights and responsibilities as human beings. Because of this,
corporations can be convicted of fraud and manslaughter.
Aspects of C corporations
A C corporation is taxed separately from its owners
under the united States federal income tax law. It differs
from an S corporation due to the fact that S corporations
are not taxed separately. For the purposes of U.S.
federal income taxes most major companies along with
many small companies are treated as C corporations.
Aspects of C corporations
Unlike S corporations, where shareholders must be
residents, citizens, or hold certain qualifying trusts, C
corporations can have foreign and domestic
shareholders,. Also in C corporations, the number of
shareholders is limitless.
Pros
The opportunity to use a medical reimbursement plan.
Allows the corporation to deduct all medical payments to a fixed dollar amount.
The need for venture capital.
Because there is more flexibility in making ownership arrangements financiers are interested in providing
money for businesses organized as C Corporations.
The intention to take the company public
Can attract financing by becoming a public company traded on a national exchange
Tax considerations-- Tax Free Fringe Benefits
Ability to accumulate earnings for future expansion at a lower tax cost than other types of entities, shareholders
also have the ability to obtain tax-free fringe benefits.
Perpetual life
Stockholders have limited liability
Transfer of ownership is easy via sale of stock
Easy to raise capital
Shared management
Adaptable for both small and large businesses
Cons
The potential for “double taxation”
Profits are first taxed to the corporation then distributed to shareholders in the form of dividends and taxed again;
the corporation cannot deduct dividend distributions
The requirement to file more paperwork
Required to hold formal board and shareholder meetings and keep accurate minutes of these meetings. tax forms
may need to be filed with federal, state, and even local officials.
Filing corporate tax forms may require an accountant
Forms can become complicated and these corporations have to pay federal taxes a full month before the
individual federal tax filing deadline.
Profits are taxed at the corporate level and dividends are taxed at the individual level
Separate taxable entity
Expensive to organize
Corporate charter can restrict types of business activities
Increased annual tax prep fees
C Corporate Examples
Apple INC- Apple is a prime example of a C Corporation.
Apple utilizes the stock market to sell stocks in their
company and spread ownership throughout the
stockholders. Apple is one of the most popular stocks on
the market currently having a price of 608.24 per stock.
Exxon Mobile- Exxon is another example of a C
Corporation by having one of the highest market values
through the advantages of a C Corporation including,
ease to raise capital, transfer of ownership through
stock, etc.