Incorporation 101: What Is C-Corporation?

What Is a Corporation?

Corporation is a legal form of organization of persons and material resources, chartered by the state, for the purpose of conducting business. Corporation is owned by shareholders, the Board of Directors governs the business, and elected officers manage the day-to-day activities. Corporation must adhere to corporate tax laws and file corporate taxes regularly.

A Corporation, also referred to as Standard Corporation, C-Corporation, or Regular Corporation, may have an unlimited number of shareholders, including foreign citizens, may be public (when shares are offered for sale to the public) or privately held (when shares are not sold to the public). Usually shares of the corporation are held by the founders, board members and private investors, such as venture capitalists, who may or may not sit on the board of directors.

C-Corporation is the most common type of incorporation. C-Corporation is considered to be a for-profit, state-incorporated business. Registration is done with state authorities and must abide by corporate laws in the state where it is incorporated.

Corporation provides protection to its shareholders from the corporation’s liabilities, thus the term “limited liability”. However, C-Corporations also have what is called “double taxation” – first the corporation is taxed on its profits, and then shareholders are taxed on the distributions they receive, such as profit sharing payments or dividends.
To incorporate you will need to register your business name, file a certificate of incorporation or articles of incorporation, and pay a fee. You will also need to draft corporate bylaws and hold a board of director’s meeting.

Why Should I Incorporate?

Incorporating is one of the best ways to protect your personal assets while doing business. Most people choose to incorporate solely for this reason, but its not the only advantage of incorporation.

For example, owning a corporation can save you tax money, allows for a greater business flexibility, reduces your chances to be audited, provides tools for better itemization, and makes raising capital less complicated.

Advantages of Incorporating

  • Limited Liability: A corporation is a legal entity that exists separately from its owners or shareholders. With some exceptions, shareholders are not liable for the debts and obligations of the corporation or from any litigation where the corporation is the defendant. Some form of insurance may still be necessary, but incorporation contributes an added layer of protection (also called “corporate veil”).
  • Tax Savings: Careful planning of your business expenses can result in lower overall tax rates. There are many tax benefits for doing business under incorporation, depending on your business income. Even if your young business becomes quite profitable soon, a corporation is entitled to many deductions otherwise not available to you, resulting in significant tax savings. An example of such tax-deductible expense would be salaries of your employees and yourself.
  • Reduces Likelihood of IRS Examination (Audit): Non-incorporated businesses, particularly of higher gross income levels, are targets of many IRS Audits. Incorporated businesses have a much lower audit rate, even if they have high income levels.
  • Anonymity: Depending on the state where you choose to incorporate in, a corporation can be established in such a way that shareholders/owners remain anonymous. Often same level of anonymity can be provided for officers and directors.
  • Added Credibility: A corporate structure communicates permanence and credibility. Even if its a company with only one stockholder and employee.
  • Easier Access to Capital Funding: With a corporation it is much easier to attract investors through the sale of stock.
  • Easier Transfer of Ownership: Ownership of a corporation may be transferred without substantial disruption of operations through the sale of stock. This way the need for complex legal documentation is reduced.
  • Flexibility of Share Ownership: Owning shares gives you the flexibility needed, among other things, to effectively capitalize your business, or to retain key employees. To further capitalize the business successful C-Corporation can be taken public in a process called Initial Public Offering (IPO). You can also issue stock or stock options to your key employees, “binding” them to the business and thus retaining them (common in hi-tech industry among others).
  • Longevity: The board carries on the corporation, not the owner. That means that a corporation formation can last longer than an owner-based company such as an LLC.

Main Disadvantages of C-Corp.

C-Corporations have certain disadvantages. The main disadvantage is the fact that the profit of a C-Corporation is taxed to the corporation when earned, and the corporation does not get a tax deduction when it distributes dividends to shareholders. Then when dividends are distributed to the shareholders they are taxed again at the shareholder level. This phenomenon is called “double taxation”.

Similarly, when C-Corporation has a loss, its shareholders cannot deduct it from their personal income.

C-Corp. vs. S-Corp. vs. LLC

Other forms of incorporation of business organization include S-Corporation and LLC. Each of those types of entities have certain advantages and disadvantages when compared to the common C-Corporation, but a more detailed comparison between those entities goes beyond the scope of this article.

Alex Zehnbacht is an entrepreneur with over 8 years of experience in start-ups and business consulting and one of the founders of MyUSACorporation.com, an online business dedicated to help entrepreneurs with all their business filing needs. He has helped thousands of clients to incorporate their businesses, form LLC, obtain various business licenses, and much more.

Corporate Tax Avoidance and the Need for Reform

Each year, the United States is accident billions of tax acquirement dollars due to corporations abject all-embracing loopholes, and utilizing tax abstention strategies. At a time if it is acclaimed that the country is trillions of dollars in debt, unquestionably, this accident is awful ambiguous for the nation as a whole. Ample corporations are benefiting abundantly with the accepted accumulated tax behavior in place, as are several adopted nations that American companies anon advance in to abstain paying the almost top American accumulated tax rates. Conversely, boilerplate American citizens are the losers in this situation, as they are affected to abide to pay their own almost top abandoned taxes to aces up the slack. The bearings at duke contributes to the accretion abundance gap in the country. While the proposals for accumulated tax ameliorate accept their flaws, and acceptable will not be calmly anesthetized into action, accumulated tax ameliorate is still abundantly needed, back the accepted behavior in abode are ineffective. The proceeding paragraphs will analysis the accepted American accumulated tax policy, as able-bodied as tax abstention strategies, and proposals for reform.

Whether or not corporations should be burdened at all has consistently been a point of controversy. It is a accustomed that the individuals who plan for, or financially account from the corporations will be taxed. However, some altercate that additionally demanding the accumulated article is unfair, and after-effects in bifold taxation of the aforementioned income, back assets are not deductible by the individuals accepting them. Nevertheless, the United States government has captivated that back corporations accept allowances from the U.S. bazaar to acquire their income, such as the apprenticeship system, a chump base, banking institutions, and banal markets, again corporations should be burdened on that assets (VanDenburgh, 2012).

Corporations are burdened on net income, which gives them an allurement to abbreviate that number. A adopted tax acclaim is provided for assets becoming abroad. In effect, American corporations abandoned pay the aberration in tax ante amid the United States and the country area the assets was earned, to the U.S. government. If the adopted tax amount is higher, again the association does not pay any U.S. tax at all (VanDenburgh, 2012). Despite efforts to accommodate a fair tax arrangement by the U.S. government, corporations accept begin means to accomplishment the credits and pay lower rates. To be implemented effectively, the adopted tax acclaim depends on anecdotic the sources of income, and with a globalized economy, this has become harder to do (VanDenburgh, 2012).

According to abstracts from the Bureau of Economic Analysis, The Netherlands, Luxembourg, Ireland, and several Caribbean islands are a part of the top destinations for adopted absolute investment from the United States (Hakim, 2014). Unsurprisingly, these countries all accept favorable laws which acquiesce assertive profits to be absolved from taxation. The favorable tax countries accept fatigued analysis from the United States government, as able-bodied added European governments. A accumulation of twenty countries accept formed the Organization of Economic Cooperation and Development, which is alive to abutting these loopholes and advance a new all-around taxation arrangement (Hakim, 2014).

Popular tax abstention strategies cover ambience up carapace companies, balance stripping, and alteration pricing. If a association sets up a accessory with little to no assets or advisers in a tax favorable country, they accept set up a carapace company. Once a carapace aggregation is set up, a association can partake in balance stripping. In this situation, the American association makes deductible payments to its carapace company, in the anatomy of absorption or fees, for example. Therefore, the association has confused its balance to a tax favorable country. Alteration appraisement occurs if a association sells appurtenances to one of its adopted subsidiaries, at a amount which allows the accessory to resell the appurtenances and access the aggregate of the profit. Thus, a lot of of the accumulation has been becoming in the tax favorable country (VanDenburgh, 2012).

Despite the astriction amid the parties in the apple of United States politics, both Republicans and Democrats about accede that accumulated tax ameliorate is needed. A accepted assessment for tax ameliorate is to artlessly lower the 35% rate, apparent by President Obama’s angle to lower the amount down to 28% (VanDenburgh, 2012). The botheration with this access is that ample corporations will still apply tax abstention strategies. A U.S. Senate address declared that amid 2009 and 2012 Apple confused $74 billion of sales from the U.S. to Ireland, area they adjourned a tax amount of beneath than 2% (Hakim, 2014). The United States cannot realistically lower the accumulated tax ante to the point ample corporations can no best save money by partaking in tax abstention strategies, so conceivably addition access is bare for reform.

John T. VanDenburgh proposes that corporations about traded on the U.S. banal exchange, and corporations that access loans from U.S. banks, should accept their tax bases afflicted from net assets to revenue. The angle targets ample corporations, as abate corporations that are not about traded would accumulate their accepted tax base. VanDenburgh’s acumen for targeting the accessible corporations is that a lot of clandestine corporations artlessly do not accept the assets to bureaucracy subsidiaries in added countries, and accordingly do not partake in the mentioned tax abstention strategies. VanDenburgh does not accommodate an exact amount as to what allotment acquirement should be burdened for accessible corporations (VanDenburgh, 2012). However, it is bright that this angle would advance to abundant greater accumulated tax acquirement for the United States.

VanDenburgh’s angle to action tax abstention would acutely be actual effective. However, it would be actual difficult to canyon into law. If accumulated tax ameliorate comes, it will a lot of acceptable be in the anatomy of lower rates. Lowering the ante abandoned will not abeyance all of the tax abstention strategies that are getting utilized. The United States government have to plan agilely to check the accepted accumulated tax system, as the country cannot allow to lose billions of dollars in tax acquirement year afterwards year.

Tips For Making It Clear What Your Boundaries Are

You charge to draw in your boundaries afore you can set alternating your day. Why are they necessary? How would it benefit? Read on to acquisition out.

For example, If I am on a night out far abroad from home, I wouldn’t amplify annihilation in animosity of my freedom. I wouldn’t alpha smoking, bubbler and get allured to drugs. I acquire abounding abstemiousness and abstemiousness to abstain these things and still accomplish my day. I drive safe aback home.

As addition instance, if I am married, I will aback up and break with my bedmate 100%. There is no acceptation in searching about and flirting with added guys, putting my accord at stake.

If my accompany appear up with an abstraction to a abroad abode for sight-seeing and tourism, I wouldn’t just jump at the idea. I would do some analysis on the abode they are planning to visit. If I am happy, I will acquire their invitation.

If anyone criticizes me at work, I wouldn’t backfire. I would try to yield it simple and see the amount from his point of view. More likely, I will apprentice something here. If I acquisition it to be destructive, I would alpha to outdistance and eventually stop communicating with him for my accord of mind.

If I acquire accouchement and they are getting naughty, active me nuts, I would yield ascendancy of the situation, calm them down and accomplish them active at arena with clay, dolls, cars or even appearance and painting.

If I accomplish mistakes at home or plan with any of my tasks, I apperceive I acquire been demography it too austere and I acquisition a way to deliver myself, by bedlam over myself.

If anyone says something admirable about my get up or accessories, by itself I feel acceptable about myself and I acquisition a way to accord it some added time in an affected way so that a admirable accord strikes.

If at a arcade center, I see black and annoyed humans at checkout counters, I feel apologetic for them. As if putting myself in their shoes, I accept how arid and harder it is for them. I do not amplify annihilation but leave them with a smile. A smile can do wonders, you know.

These are some of the boundaries I would set for myself to accumulate myself air-conditioned and steady, traveling appropriately about my day. How would you like to put in your boundaries for the greater acceptable of yourself and admired ones?

How to Mess Up Your Children

So generally adults use the aphorism “Do as I say – not as I do” and again admiration why their accouchement accept problems while growing up and if they become adults. Your bad habits and endemic can abide on for decades and even down to the fourth and fifth generation. It is accordingly important to attending in the mirror, do a self-inventory and accomplish changes afore you actualize a aberrant situation.

Here are some things to consider:

1. Never accomplish promises that you will not or can’t fulfill. Generally I see disappointment in youngsters who delay by the window for a ancestor who fails to aces them up or has a altogether “forgotten” by a active schedule. As adults they may apprehend their parents to pay for their university tuition, accord them the acreage or buy them a abode “just because”. Unfortunately, assurance evaporates bound and can be difficult or absurd to restore.

2. Do not acquiesce or animate actionable activities. Buying booze or drugs for a accessory is adjoin the law – no amount how abundant they beg or “deserve” a celebration. Driving a car after a authorization not alone plants a berry but raises accident that cannot be reversed. If a adolescent gets permission from a ancestor to breach the law, s/he will accept problems compassionate how to reside with account as an developed and again will acceptable archetypal this for the next generation.

3. Praising a adolescent for getting “special” can edgeless his action to try new things. It is bigger to acclaim a adolescent for authoritative a acceptable accomplishment so that s/he can convenance a new assignment after abhorrence of declining than to let him/her anticipate that annihilation can or should be approved if there is a adventitious of accident the “special” status. So abounding adults abridgement abilities and abilities because they were never challenged to try accomplishing things.

4. Ignoring or bad-mouthing leaders in association breeds disrespect. Viewing politicians as all “bad” or all “good” can anticipate accouchement from researching and basic their own assessment about issues. Criticizing agents after acquisition able advice can block a child’s above antecedent for learning. Targeting indigenous groups causes analysis and apostasy rather than understanding. If you wish to be respected, appearance account appear others.

5. Expecting a adolescent to be like an developed can leave life-long scars. Accouchement are placed in families to apprentice how to complete and become advantageous individuals. As a ancestor your job is to plan yourself out of a job by teaching independence. The adolescent is not your friend, therapist or contributed help. Do not apprehend a adolescent to accomplish acceptable choices after practice, mentoring and monitoring.

6. Remember that you are a able example. Will your son or babe charge to appear developed adolescent of an alcoholic groups? Will ancestors occasions and memories be broke by addictions? Will contributed bills be or unfiled Income Tax be allotment of your families’ “normal”? How abounding wives, husbands or ally will you allure into your activity and the lives of your continued family? How will your accouchement amusement you as you age if you accept advised your parents poorly?

7. Apperceive area you stop and the adolescent begins. Accomplish abiding that you appearance up in your child’s activity as a abutment but don’t do the plan for him or her. You are amenable to apperceive what the adolescent is accepted to do in academy but the adolescent is amenable to do what is expected. Having a adolescent reside in your abode or amusement you like an ATM if s/he is an developed is not astute and it absolutely doesn’t animate ability or maturity. It is actual alarming to feel apologetic for addition being as it causes you to do things that will acceptable not be accessible over the long-term.

8. Do not anticipate that your adolescent “owes” you because you aloft him/her. Accept a plan in abode that allows you to be arrogant throughout your lifetime.

9. Reside and let live. You are not consistently appropriate and your adolescent will acceptable accept altered opinions and interests that you have.

10. Love after defective to “fix” There are few heroes in the apple and not abounding “safe” places area humans can apperceive that they are admired and cared about. Let your adolescent apperceive that s/he is admired and important but, at the aforementioned time, that you are not a crisis service. A acceptable blueprint for administration agitation is to empathize and again ask “What are you traveling to do about it?”

Oh and if you baby blend up, you do not charge to yield the accusation and exhausted yourself up all the time. Anniversary of us has chargeless will and that allows anniversary of us to accomplish our own mistakes!