Experienced Pleasanton business formation attorney James G. Schwartz can help you decide if a C Corporation is an appropriate structure for your business. A C Corporation is a legal entity formed under state civil law and owned by shareholders. It is more expensive to set up and maintain this type of business structure than sole proprietorships or partnerships, but there are significant benefits to certain types of businesses that choose to organize as C Corporations in Alameda County and elsewhere in California.
One of the most significant reasons businesses choose to organize under a C Corporation is to obtain maximum protection from liability. If it properly formed and maintained, a C Corporation shields business founders and owners from personal liability for debts or lawsuits. Not only is liability protection available, but owners can also receive health coverage tax-free because the corporation can fully deduct health insurance premiums. Under other structures, shareholders or individuals must report the benefit as income and take a deduction from gross income. A C Corporation can set up medical reimbursement plans to pay fixed dollar amounts for its employees' out-of-pocket medical costs.California Requirements for C Corporations
There are a number of detailed responsibilities that business owners that organize this way must follow. A C Corporation is generally taxed under Subchapter C of the federal Internal Revenue Code. The corporation itself is taxed every year on earnings, and the shareholders are individually taxed when dividends are distributed. Unlike an S Corporation, a C Corporation can have more than 100 shareholders and provide different classes of shares. The different classes may reflect the desire for only certain shareholders to participate and make decisions in the business.
A C Corporation must register with the California Secretary of State and create bylaws pertaining to officers' responsibilities, director meetings, stockholder meetings and more. The corporation must keep a separate bank account and records from its individual shareholders. The corporation's owners control the corporation but elect directors who make major decisions and elect officers, who make daily decisions. In California, C Corporations must keep minutes of both director and shareholder meetings, and these minutes must be maintained at the corporate office.
In exchange for fulfilling these requirements, owners of a C Corporation are not liable for the business's losses or liabilities. Creditors can only recover from the corporation and its assets. Ownership in a corporation can be transferred by selling stock, and additional stock can be issued to allow for new owners. Corporations are taxed at 8.84% and are subject to a minimum tax of $800 that is due the first quarter of every accounting period, though the minimum is waived for the first taxable year.
If you want to get investors for your company, you are usually best off choosing a C Corporation structure. Unlike an S Corporation, you can have non-residents and corporations as your investors in a C Corporation. This can be especially helpful if you are an immigrant-owned business and the start-up capital for your business includes family savings. A C Corporation can receive foreign investments and have nonresident alien shareholders.Consult An Experienced Alameda County C Corporation Lawyer
With over 30 years of experience handling business formations, Mr. Schwartz can advise business clients on what corporate structure will best serve their goals. C Corporations can be challenging to form properly and maintain. Contact experienced Pleasanton business law attorney James G. Schwartz at 925-463-1073 or via our contact form. Our office serves San Ramon, Fremont, Hayward, Oakland, and Newark, as well as other parts of the East Bay.