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Know the basics of C corporations

On Behalf of | Nov 23, 2018 | Business Formation & Planning

When Florida residents start a business, one decision they need to make is what kind of business they will form. Some people may be drawn to the benefits of C corporations and it is important for them to understand the details of this legal structure.

There are many reasons a C corporation is an attractive option for business owners. According to FindLaw, people typically choose this kind of corporation because it is easy to form. While some legal structures request that businesses meet certain requirements, C corporations do not require companies to meet certain criteria. They also offer protection so a business owner is not personally liable for the company.

C corporations generally do not place a limit on the number of shareholders a company can have, allowing the business to experience limitless growth. This legal structure also guarantees that the company will exist even after the founder leaves. Additionally, C corporations can usually deduct certain business expenses on tax forms.

As people decide whether a C corporation is the right legal structure for their business, it is important for them to understand the potential drawbacks of this structure. Incorporate.com says that this type of corporation can sometimes be expensive early on. As people begin the incorporation process, they typically need to pay fees. Additionally, if the business has a bad year, company losses usually cannot be deducted on a tax return. People also may pay more in taxes when they form a C corporation. This legal structure generally has a double taxation system and both the company and the shareholders might need to pay taxes on business earnings.