Many large companies that employ numerous employees decide to establish themselves as traditional (or “C”) corporations. This reference to the letter “C” simply refers to Subchapter C of Chapter 1 of the Internal Revenue Code – that’s “where you find general tax rules affecting corporations and their shareholders.”
Although running a corporation is a very complex and demanding task, people who create them appreciate the various legal and financial advantages that they offer which are not available to all other business structures. Here’s a brief overview of why many entrepreneurs choose to form “C” corporations over partnerships, limited liability companies or other types of businesses.
Common Legal and Financial Advantages Offered by “C” Corporations
They are allowed to “go public” with an “initial public offering” (IPO) that allows them to raise often critically needed investment capital. This is done in exchange for selling shares of stock in the company. IPOs also help promising corporations attract the attention of top corporate employee applicants;
Individuals who buy shares of stock in corporations become owners – yet they are usually not held legally liable for a corporation’s debts or alleged illegal activities, should any ever occur. (In general, only the corporation can be sued in court over such claims);
Stated differently, business owners who form corporations are usually not risking their own personal assets;
Corporations can theoretically continue operating indefinitely, assuming they remain profitable enough in the eyes of their shareholders;
Special tax deductions are often available to corporations that are not provided to other companies and businesses.
While it’s important to make sure you obtain all of these advantages of forming a “C” corporation, don’t forget to also seek out the help of a competent Peachtree City attorney to help you form one in complete accordance with the laws of Georgia – or whichever state in which it will be registered. Likewise, be sure you pay all of the corporation’s legitimate federal, state, and local taxes once it’s been formed. Another important tip is to regularly review the corporate ledgers -- making sure your accountants have the complex management skills required to keep the corporation thriving, the employees fully engaged with their positions, and the shareholders happy with the returns on their investments. Finally, always keep in mind that despite all of the basic advantages offered by traditional corporations, their one major drawback is that their earnings are usually taxed twice – “first when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.”
To obtain help with handling all of your Georgia business planning needs, please contact Shane Smith Law today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (980) 246-2656.