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Pros and cons of C corporation

Operating a C corporation has several significant advantages, including limited liability protections, perpetual existence,  and unlimited shareholders. However, there are some drawbacks, such as double taxation, increased corporate formalities, and additional expenses for operating it. SO here this article gives the pros and cons of c corporation to better understand this topic.

Pros of C corporation:

  1. They can have an unlimited number of shareholders from all over the world.
  2. Officers and directors of Nevada and Wyoming corporations can line up anywhere in the world. This can be beneficial to foreign investors.
  3. In general, audits of C corporations occur less frequently than those of single proprietorships.
  4. In a C corporation, Limited liability is provided for all shareholders, directors, employees and officers.
  5. They have the most deductions and expenses permitted by the IRS.
  6. They are the most well-known business entity in the world, and they are the best for going public. Nominee officers and directors can be used in Nevada and Wyoming, providing additional levels of privacy.
  7. They can have a variety of shareholders allowed, without restriction on country of origin.
  8. C corporations provide excellent equity funding and are attractive to investors due to clearly defined ownership, management and tax structures.
  9. Another benefit of a c corporation is it is the lower maximum tax rate that applies to non-corporate enterprises in comparison to the maximum personal tax rate.

Cons of C corporation:

  1. Increased regulations and complex rules necessitate the filing of numerous documents. Which include articles of incorporation, corporate bylaws, corporate minutes certificates of good standing, and others.
  2. The corporation must pay a variety of state and federal filing fees, each state has its own set of rules. Dealing with these regulations may necessitate the hiring of an attorney or accountant.
  3. The corporation’s owners pay a double tax on the company’s earnings, and shareholders must pay taxes on dividends received. However, if the owners take a salary, the corporations are not required to pay taxes on their earnings. Payments are considered a business expense.
  4. C corporation is more costly and time-consuming to establish and maintain than other types of business structures.
  5. Another drawback of a C corporation is it is a rigid, more complex management structure that helps in capital raising.
  6. C corporations are more regulated in general because they must hold a number of periodic meetings. Regular and board meetings are included. Minutes from each of these meetings must also be kept on file. The government has a high level of oversight of such corporations due to the complex tax laws and greater protection afforded to C-corporation owners.
  7. C corporation has strict guidelines governing parts of company operations including meetings and document retention.

Conclusion:

You should think about your particular goals and situation before choosing your company structure. Contact a small business adviser, a legal counsel, or a certified tax specialist for advice specific to your circumstances.

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Divya Chauhan
Divya Chauhan is an expert writer with 10+ years of experience as a content writer. They specialize in making complex topics like IT, Health, and general topic easy to understand. Divya has written over thousands of articles to help people with their content. Prior to joining Way2benefits’s editorial team in 2020, Divya worked as a Professor of BCA college and freelancer blogger.

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