Corporations are legal entities established by charter with certain legal rights, powers, privileges, and liabilities. Corporations can be established in several formats but always become their own entity with independent legal rights and obligations. Corporations can be more difficult than other business options in that they have defined structures which you must maintain, however, they offer numerous advantages in terms of legal rights, taxation, and the ability to create stock.
C-Corporation
A C-Corporation is a company owned by shareholders with a board of directors, who decide how the company is run. Corporations represent their own entities and can be sued, maintain financial liability, and pay their own income tax. This means that in case of financial problems or litigation, the risk falls on the corporation rather than the owners. C-Corps pay their own tax rate, which is 21%.
- C-Corporations can be publicly or privately held. Public companies sell shares to the general public and must disclose financial information. Private C-Corps do not.
- C-Corps must maintain a strict structure with a board of directors and managers to run the organization.
- C-Corporations can choose to go public to raise money from the public
- C-Corporations allow owners to deduct personal wages, health premiums, and medical expense income from net profit
- C-Corps are not bound to individual owners or shareholders. They are flexible and able to change hands without restructure
As a C-Corporation, you will pay taxation on company income and any wages you allot yourself as a salary separately, which is known as double taxation.