Incorporate a U.S. C-Corporation
Setup a U.S. C-Corporation - A corporation, sometimes called a 'C-corp', is a legal entity that's separate from its owners. Corporations can make a profit, be taxed, and can be held legally liable. Corporations offer the strongest protection to its owners from personal liability, but the administrative cost of operating a corporation is generally higher than other structures. Corporations have an advantage when it comes to raising capital because they can raise funds through the sale of stock, which can also be a benefit in attracting employees.
The Structure of a C-Corporation
A C-Corporation has Limited Liability - Because a C-Corp is a separate legal entity, the liabilities of the business are separate from the liabilities of the directors, investors and shareholders. Generally, the owners of a C Corporation are protected from being liable for the business’s obligations. This does not apply in all cases, for example if corporate funds are misused, there is willful fraud, or if certain rules and regulations are not followed.
A C-Corporation Exists Independently of its Owners - A C-Corporation can have “Perpetual Existence” — this is in contrast to sole proprietorships or partnerships where a business only exists for as long as the proprietors or owners are alive and in the business.
Ownership of C-Corporations Can Be Fluid and Transferred - Ownership in a C-Corporation is decided by who holds the stocks it issues. These stocks can be bought and sold between investors, and if the company’s shares are publicly traded on a stock exchange, institutions and members of the public can own stock in the company.
Ease of Access to Funding Through Issuing Stock - If a C Corporation want to raise money, it can hold an “Initial Public Offering (IPO)” where it “goes public” and offers shares for sale on a stock exchange. This can bring significant money into a business. They can also choose to issue shares periodically to raise further funding, although this can dilute the value of existing shares.
Enhanced Business or Corporate Credibility - Most of the businesses that are household names are C Corporations. Incorporating as a C Corp demonstrates to others that you expect to see significant growth and can enhance the business’s credibility and authority.
The Benefits of a C-Corporation
The Best Tax Structure for Non-residents - Tax filing obligations are greatly simplified by operating as a C-corporation and operating as a C-corporation reduces both the quantity and complexity of your tax filing obligations with the IRS.
The Ability to Sell Shares - If your looking to obtain investment, venture capital or potentially sell your business venture at some point, a C-corporation is the preferred legal structure for all U.S. based investors.
The Parent / Subsidiary Structure - If you have an existing company outside of the U.S. and your looking to expand into the U.S. market, having your foreign entity own the shares in your U.S. C-corporation subsidiary is an excellent structure for many reasons including taxation, intellectual property rights as well as business visa applications.
We provide fixed business address services in any of the 50 states, often with multiple options to choose from. Our virtual address service offers a permanent business street address for registering your company.
Setup a C-Corp
Setup a US C-Corporation - C-Corporations can be a good choice for medium or higher-risk businesses, businesses that need to raise money, and businesses that plan to "go public" or eventually be sold.
Once we have your company formation complete and have your articles back from the state, alongside your EIN tax ID IRS letter, we can put you in touch with our banking partners to get your account setup.
Forming a C Corporation turns your business into a separate legal entity that is distinct from you and your personal assets. This means that you and your assets cannot be targeted in a lawsuit that relates to your business. Moreover, if a creditor comes looking to satisfy business debt or even the personal debt of one of the other corporation members, they cannot target you and your personal assets.
Corporations are taxed differently than other business structures: A corporation is the only type of business that must pay its own income taxes on profits. In contrast, partnerships, sole proprietorships, S corporations, and limited liability companies (LLCs) are not taxed on business profits; instead, the profits “pass through” the businesses to their owners, who report business income or losses on their personal tax returns.
The bylaws of a corporation are the governing rules by which the corporation operates. When a corporation is formed, the first act of the board of directors must be to create the bylaws, which is a single document encompassing all the rules.
Most businesses work with an attorney to write the bylaws. Still, it helps to learn about bylaws and why they’re important to running a business and maintaining order in an organization.
What Are Bylaws?
Think of corporate bylaws as the overall guiding principles for operating the business. These principles direct the board of directors in their work to oversee the day-to-day operations of the corporation.
Note: We provide Bylaws with all our C-corporation business formations.
Starting in 2018, corporations pay a flat tax of 21% on all their profits. The 21% rate is lower than the top five individual income tax rates, which range from 22% to 37%. The benefit of the lower rates is largely lost due to double taxation if corporate profits are distributed to the shareholders, who must pay individual income tax on such dividends. However, many corporations want or need to retain some profits in the business at the end of the year — for instance, to fund expansion and future growth. If it does, that money will be taxed only once, at the 21% corporate income tax rate. Thus, a corporation’s owners can save money by keeping some profits in the company.
There are two main types of corporations – the S-Corporation and the C-Corporation. Every corporation is considered a C corp when it is formed with the Secretary of State. The distinction is made on a federal level and processed by the IRS.
A corporation that wants to be taxed as a small business corporation will file a form with the IRS called Form 2553 and file their taxes using 1120s tax return. Corporations that do not file this form are taxed as traditional corporations and file the 1120 tax return.
A C-corporation files a corporate tax return and pays taxes on the profits. The post tax income may then be distributed to the corporation shareholders in the the form of dividends. The shareholders are then taxed on dividends, which effectively forces the ownership of a corporation to pay taxes on the same earnings twice- once at the corporate level, and then at an individual level. This is known as “double taxation.”
An S-Corporation is similar to a Limited Liability Company in the sense that the profits of the company flow directly to the shareholders. This is known as pass through taxation. The profits of the S – Corporation are distributed proportionally to share percentages.
Tax Advantages of a C-Corporation:
The corporate tax rates are typically lower than personal income tax rates. Because corporate tax rates are lower, companies that have retained earnings can take advantage of the lower rates.
Limited Liability Companies (LLC)
An LLC like the S – Corporation provides for pass through taxation. An LLC is considered a disregarded entity and its tax treatment depends on the number of members. A single member LLC is taxed as sole proprietorship while an LLC with more than one member is taxed as a partnership. A very unique advantage of the LLC is that it can elect to be taxed as S-Corporations or even a C – Corporation if it chooses.
Tax Advantages of the LLC:
Multiple options in terms of taxation. Extremely flexible in how it chooses to distribute profits which allows the owners to distribute profits or losses in ways that are advantageous to their tax situation.
There are no citizenship or residence requirements for ownership of a C Corporation or an LLC. The S Corporation however does not allow nonresident aliens to be shareholders (owner), but any US citizen or resident alien may be a shareholder (owner).
1. S-Corps present the same tax problems for VCs as LLCs do.
Like LLCs, S-Corps are “pass-through” entities, meaning that the S-corp doesn’t pay federal income tax. Rather, the S-Corp’s shareholders pay federal income tax on the company’s taxable income, based on their pro-rated stock ownership. VCs simply don’t want to deal with this sort of complexity.
2. Most VC firms can’t legally be shareholders in an S-Corp.
To legally invest in an S-Corp, shareholders must be U.S. citizens or residents and “natural persons.” Not only does this rule out foreign investors, it also rules out most domestic VC money, which typically comes from VC firms that are set up as partnerships or LLCs. In other words, they are not “natural persons.”
Also, VC firms with tax-exempt partners legally can’t invest in S-Corps because they’re pass-through entities.
3. Only C-Corps can offer preferred stock.
Even if you could find American-based individual venture capitalists who legally could invest in your company, they would likely avoid your S-Corp. Here’s why: S-Corps can only offer common stock, not preferred stock. And preferred stock—which pays higher dividends and puts stockholders first in line to get paid out in a liquidity event—is exactly what VCs expect when they take a significant risk on your company.
4. C-Corps don’t have limitations on growth.
Unlike a C-Corp, an S-Corp is limited to only 100 shareholders. Although this may sound like a lot for a startup that has yet to issue a single stock, this upper limit can be reached rather quickly, especially if a cash-strapped startup offers extra perks in the form of employee stock. VCs are likely to worry about a startup’s inability to grow once the 100 shareholder threshold has been reached. What if you’ve maxed out on shareholders and still need to raise more money to truly scale your company?
In certain instances where required, we will use an online notarization service to validate your identity as the company founder or representative in association with your registered business address. To complete this simple process we use an online notarization platform provided by our partner, Notarize, the online notary public.
US Business Address
To open a company in the United States, you are required to have a US business address in the state of incorporation. Once step 1 has been completed, we will obtain a registered business address for you in the state of your company formation. This address serves as a business address and registered mail forwarding address.
Filing Documents with State
For step 3 in your company formation, the filling of incorporation documents with the state or federal government is required. As part of our U.S company formation services we will file these documents on your behalf. This is part of our incorporation service.
U.S Business Bank Account
Foreigners (non-U.S. residents) can open a U.S. business bank account for their company. You don’t have to be an American or a U.S. resident to open a business bank account in the U.S. There are 2 main options for foreigners who need to open an account, in person or via an international branch.
Registered Agent Services
If you’re forming a corporation or a limited liability company, you’ll need to select a registered agent for your business and provide the agent’s name and address on the formation documents you file with the state. We can provide this service on your behalf. We offer registered agent services in 50 states.
Bylaws and Resolutions
Bylaws and resolutions are the initial decisions of your corporation’s board of directors and basic "operating rules" of your corporation. As part of our U.S company formation services we will provide initial drafts of these on your behalf. This is part of our incorporation service.
Obtaining an EIN Tax ID
An EIN Tax ID is required by the IRS and U.S Banks to track your business associated income and operate your business legally. As part of our U.S business formation services we will obtain an EIN on your behalf. This is part of our incorporation service.
International Docs Delivery
As part of our service for international clients, where you select the option for a corporate kit, we will deliver your business incorporation documents, EIN tax ID forms and any additional selected supplements to you anywhere in the world as part of our service offering.
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