The legal structure of a business’s C corporation status limits an owner’s financial and tort liabilities for losses that may result in the case of a default, negligence lawsuit, or regulatory fine.

What are the drawbacks of a C corporation?

The owners and shareholders of a C corporation automatically have limited liability in relation to business debts and litigation. Taxation is the main drawback of C corporation status. Revenue is taxed twice; both at the company level and shareholder earnings. Filing Articles of Incorporation can also be costly.

Who are the common shareholders of a C corporation?

What is a C Corporation? C corporations are the most common type of corporation organized by companies in the United States. Preferred shareholders and common shareholders are investors in a corporation with apportioned rights to earnings distribution, and some influence on board decisions.

How long does a C corporation have to file a tax return?

Once approved, a C corporation must file a federal tax return for at least 5 years. C corporations remain official businesses in perpetuity, unless otherwise transferred, under U.S. law.

What do you need to know about forming a C corporation?

The first step in forming a C corporation is to choose and register an unregistered business name. The registrant will file the articles of incorporation with the Secretary of State according to the laws of that state. C corporations offer stock to shareholders, who, upon purchase, become owners of the corporation.

How are C Corps different from S corporations?

The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation. C-corps can be compared with S corporations and limited liability companies (LLCs), among others, which also separate a company’s assets from its owners, but with different legal structures and tax treatment.