Advantages of a C Corporation
There are many benefits of a C Corp. Below are just a few that stand out.
- Limited liability. This applies to directors, officers, shareholders, and employees.
- Perpetual existence. Even if the owner leaves the company.
- Enhanced credibility. Gain respect among suppliers and lenders.
- Unlimited growth potential. The sky’s the limit thanks to the sale of stock.
- No shareholders limit. However, once the company has $10 million in assets and 500 shareholders, it is required to register with the SEC under the Securities Exchange Act of 1934.
- Certain tax advantages. Enjoy tax-deductible business expenses.
Disadvantages of a C Corporation
Having unlimited growth comes with a few minor setbacks.
- Double taxation. It’s inevitable as revenue is taxed at the company level and again as shareholder dividends.
- Expensive to start. There are a lot of fees that come with filing the Articles of Incorporation. And C Corporations pay fees to the state in which they operate.
- Regulations and formalities. C Corps experience more government oversight than other companies due to complex tax rules and the protection provided to owners from being responsible for debts, lawsuits, and other financial obligations.
- No deduction of corporate losses. Unlike an S Corporation (S Corp), shareholders can’t deduct losses on their personal tax returns.