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Why should I choose a C corporation?

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.