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15+ Amazing Benefits of C Corporation



C Corporation refers to any corporation in the United States which is taxed separately from the corporation owner. The reason many corporation are choosing this type of paying taxes route is because of this way might aid entrepreneurs in achieving lower overall burden of tax.

With this simple route of paying for taxes structure, it can serve as an extremely useful tools for the purpose of shifting income for tax. The C Corporation also provide the entrepreneur with tax write-offs and benefited from higher financial income in the future. To provide you with better organized list of C Corporation, here they are:

Benefits of C Corporation

Minimize the amount of overall tax burden

By using the C Corporation route, the overall tax burden could be reduced to a minimum amount as mentioned above. As mentioned on the corporate schedule on page 17 form 1120, the tax which the corporation has to pay is sometime considerably lower than the individual rates of tax. For instance, the first $50,000 of profit produced by a corporation is rated for 15 percent of tax while for the individual is taxed for 28 percent of tax with the same amount of income.

C Corporation carry profits and losses back and forth

The C Corporation has the privilege to decide when would be their fiscal year due to fiscal year usually must correspond with the calendar for S Corporation. Shareholders of the C Corporation are able to shift their income easier. They may decide when to pay taxes on bonuses and also decide when to go for losses. In this way, they are able to substantially reducing the tax bills to a minimum amount.

Future Expansion Funds Accumulation at minimum tax cost.

The C Corporation allow the corporation’s shareholders to properly manage their earnings and income within their company in preparation for the future company expansion. Compared to the profits from the S corporations which would usually appear on the shareholder’s return therefore causing the owners would still be thrown into higher taxes even though they are still investing their profits back into the company.

Bonuses and Salaries Written off

With the C Corporation route of taxes, the shareholders of C Corporation are able to appoint themselves as salaried employees. Therefore instead of receiving dividends of which the shareholder is entitled of, the shareholders would receive their dividends in the form of salaries for regular employee. This will allow the shareholder to save some amount of income they receive since the dividends are entitled to pay taxes twice the amount of regular salary. This is the option which is usually used by shareholders in order to evade the heavier charged of taxes.

Deduction of other fringe benefits and medical premium.

C Corporation has the possibilities of granting the shareholders and the employees of corporation to receive tax free for the medical reimbursement plans, disability insurance, long-term care and premiums for health. While for the S Corporation shareholders, they usually deduct medical cost from the gross income. However, they still have to declare these fringe benefits as their income.

Charitable Contributions write off

C Corporation is the only corporation which is able to deduct contributions into the eligible charities as the business expense. Provided that the contributions is not more than ten percent of taxable income in any year. It is also possible for the C Corporation to carry the charitable donations above the limit towards the next five years in the future.

Multiple Years of Losses carried

The business structure of C Corporation is able to take on large amount of capital and operate on losses. This is proved to be very important because the new start up business may tend to take on substantial losses over the early period of business start-up and over several years of losses in commencing business. The C Corporation allow the business starter to keep commencing business if the company believes in the future it is possible to make a return income covering all the losses in the previous years.

Less Ownership restrictions than S Corporation

The C Corporation has less ownership restrictions than the S Corporations.

No Limit of Shareholder

The C Corporation has no limit of shareholders rules compared to the S Corporation which only has the limit of 100 shareholder rule. The S Corporation also has the restriction of no non-individual owners and no non-resident alien owners.

C Corporation can issue more than one class of stock

The issue of more than one class of stock is usually causing issue to the S Corporation because they can only issue “One” class of stock. Therefore this issue is making the entrepreneurs in S Corporation are having more hard time in finding more equity investors.

Passive Investors Encouraged

Passive investors tend to love C Corporation than S Corporation. The reason is that the C Corporation is more tax friendly towards the passive investors. The S Corporation may be able to pass losses through the individual tax return but this only applies to the active individual in the corporation management. This does not apply for the passive individual or investor.

Financial Attractive and going public

The flexible ownership characteristic of the C Corporation attract more investors than the S Corporation. A small start-up business has the possibilities of growing into a big business and thus might attract funding of other investors by becoming a publicly traded company which is placed on a national stock exchange.

Widely Recognized entity in the world.

The C Corporation is the world most recognized entity and also the premier entity for going public in the world.

Great for conventional business

The C Corporation is good for business which sells products, and has the structural form of a company. But the C Corporation is not recommended for certain company such as the real estate company. Because the tax treatment is based on the sale of assets.

Limit the owners liability

The legal obligation of the business cannot be passed down to the obligations of the individual associated with the business.

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