What is a C-Corp?
The preferred structure for businesses seeking outside investment, issuing stock, or eventually going public.
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A C-Corporation is the standard corporate structure in the United States. It is a legal entity completely separate from its owners (shareholders), with its own tax identity, capable of issuing stock, having unlimited shareholders, and operating perpetually regardless of changes in ownership.
Unlike an LLC or S-Corp, a C-Corp pays corporate taxes on its profits, and then shareholders pay individual taxes on the dividends they receive, known as "double taxation". However, this structure is the preferred one by venture capital investors.
What is it for?
A C-Corp mainly serves businesses that plan to grow significantly, seek venture capital investment, issue stock options to employees, or eventually become a public company.
How does the process work?
Choose a unique name
Must be available in the state and generally include "Inc.", "Corporation", or "Corp."
File the Articles of Incorporation
Official document that legally creates your corporation with the state, specifying the number of authorized shares.
Designate a Registered Agent
A person or company with a physical address in the state, authorized to receive legal documents.
Issue stock and create corporate bylaws
Defines the ownership structure and internal corporate governance rules.
Get your EIN and choose your fiscal year
Needed to open bank accounts, hire employees, and file corporate taxes.
Advantages and Disadvantages
Advantages
- ✓The preferred structure for venture capital investors
- ✓Unlimited shareholders, including foreign investors and institutions
- ✓Can have multiple classes of stock
- ✓Strong limited liability protection
- ✓Perpetual existence, independent of ownership changes
- ✓Flat federal corporate tax rate (21%)
Disadvantages
- !Double taxation: the company pays taxes, then shareholders pay taxes too
- !Greater administrative complexity (board meetings, minutes, bylaws)
- !Higher formation and maintenance costs
- !Some states charge significant franchise taxes (e.g. Delaware)
- !Requires more ongoing corporate formalities
Who should use a C-Corp?
- ✓Startups planning to seek venture capital
- ✓Companies wanting to issue stock options to employees
- ✓Businesses with significant international expansion plans
- ✓Companies eventually planning to go public
- ✓Businesses with foreign investors
When is it NOT the best option?
- ✕If you are a small business with no plans to seek outside investment
- ✕If you want to avoid double taxation (consider LLC or S-Corp)
- ✕If you prefer fewer administrative formalities
- ✕If your business is a nonprofit organization
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