One popular choice for incorporating a business in Michigan is founding a C Corporation. Also known as a C corp for short, this is a kind of corporation with a particular legal structure that is taxed differently than other choices for incorporation. Starting a C corp can produce certain benefits you should consider before incorporating.
Business & corporate law of C corporations
C corporations operate very differently from other choices for incorporation, such as limited liability companies and S corporations. Some of the most significant differences between these choices are that they can change the tax status of your corporation. C corporations pay taxes through income taxes and when they are paid as dividends to investors. S corporations only pay taxes when dividends are paid to investors, and an LLC acts similarly with taxes paid by members.
Benefits of C corporations
While the prospect of profits being taxed twice may not seem preferable, there are great benefits to choosing a C corporation over other options. These include the fact that:
- Profits can be kept within the business
- The limited liability of C corporations protects the owners
- The C corporation can survive its original owners
- The structure of C corporations easily attracts investors
- The number of shareholders of a C corporation is unlimited
- The growth potential for the business is high
In regards to business law, C corporations can help to shield owners from the liabilities they would have if the business were a sole proprietorship or partnership. Furthermore, the tax status of a C corporation is beneficial because it more easily allows the profits of the business to be reinvested into the business, unlike with an S corporation or LLC.
As such, a C corporation is one of the best choices for attracting investors and helping to grow the company quickly. If you have high aspirations for your new company, choosing a C corporation can help you reach your goals.