If you’re in the process of forming a business, you’ve probably heard the term “C corporation,” as it’s one of the legal structures that will be available to you as a business model. If you choose to form your business as a C corporation, specific tax rules will apply to your business. As such, before you choose this model, you may want to familiarize yourself with this structure, it’s potential benefits, and whether it’s right for you and your needs as a business owner.
C corporations offer business owners limited protections from personal liability. If the business, for example, is involved in a lawsuit or an issue relating to a loan, the owner for the business will not have his or her personal assets at risk of being depleted if the business loses the lawsuit. However, with this limited liability protection comes a more complicated business structure that the owner must maintain and adhere to.
One potential setback of a C corporation is the fact that the owners who pay dividends may be subject to double taxation. This happens because the corporation itself will be taxed, and then the shareholders who receive dividends will also be taxed. The corporation will have to file its own income tax returns, just as the individuals who profit from the corporation will have to file their tax returns.
The C corporation is the most popular business corporate model, but there are many others to choose from. By speaking with a Pennsylvania business formation lawyer, you can review your options and decide which business model best suits your needs.
Source: FindLaw, “Tax Differences Between C and S Corporations,” accessed Sep. 29, 2017