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Home Business Formations C Corporation

C Corporation

 

 


Overview

The standard corporation, also called a C corporation, is the most common corporate structure. The corporation is a separate legal entity owned by the shareholder(s). Because of this, the shareholders cannot be held personally responsible for the debts of the corporation. The shareholders’ personal liability is typically limited only to the amount the shareholder invested in the company.

Taxation implications are usually a significant consideration when deciding which corporate structure to choose. The shareholders of C corporations may experience double taxation, which simply means that corporate profits are taxed at both the entity and individual levels. Profits of the business are reported and taxed at the entity level first. Then if the corporation distributes any portion of the remaining profits to the shareholders in the form of dividends, the shareholders must report the dividend as personal income and pay taxes on it at the individual level.

Advantages of a C corporation

  • Shareholders of a C corporation are typically not personally responsible for the debts and liabilities of the business

  • C corporations can have an unlimited number of shareholders

  • Ownership of a C corporation is easily transferable through the sale of stock

  • C corporations have unlimited life extending beyond the illness or death of the owners

  • Additional capital can be raised by selling shares of the C corporation's stock

  • Potential customers may perceive a C corporation as a more professional entity than a sole proprietorship or partnership

  • C corporations are generally audited less frequently than sole proprietorships

  • Certain C corporation business expenses may be tax-deductible

  • Forming a C corporation can result in self-employment tax savings

  • C corporations may provide a number of income and tax savings

To create a C corporation the proper formation documents must be filed with the appropriate state agency and the necessary state filing fees paid.


Pricing
If you decide that a C corporation is the best option for your business, we will form your C corporation in Texas, faster than anyone else, without costly legal fees. We offer three cost-saving packages:


$139 + State Fees

  • 30 Minute Legal Consultation

  • Preliminary Name Check

  • Preparation & Filing of Formation Documents

  • Free Client Support
     

 

$279 + State Fees

  • 1 Hour Legal Consultation

  • Preliminary Name Check

  • Preparation & Filing of Formation Documents

  • State Expedites Your Filing

  • Corporate Kit & Seal

  • Free Client Support

  • Sample Corporate Documents


$399 + State Fees

  • 2 Hour Legal Consultation

  • Preliminary Name Check

  • Preparation & Filing of Formation Documents

  • State Expedites Your Filing

  • Corporate Kit & Seal

  • Tax ID (EIN) Obtainment

  • Certified Copy of State Filed Documents

  • Free Client Support

  • Sample Corporate Documents

  • Overnight Shipping

Need us to form your business entity formed immediately? Try our Rush Filing Service.
As the quickest way to form your business, the Baba Law Firm offers a Rush Filing Service option to gain state approval of your formation in either the same day (depending on time of order) to 24 hours.

We strive to complete your order the same day in most situations. If not the same day, then usually within 24 hours. On rare occasion, it can take up to 48 hours. The 48 hours is usually when there are issues with the state that need to be resolved before we can proceed with your filing.

This high priority service only costs an additional $79 to your order.

This service is particularly valuable when you need proof of formation to secure a contract or open a bank account.
 

FAQ's
 

What is a C corporation?
The standard corporation, also called a C corporation, is the most common corporate structure. To create a C corporation the proper formation documents must be filed with the appropriate state agency and the necessary state filings fees paid.

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What paperwork is required to incorporate?
A certificate of incorporation conforming to Texas law must be prepared and filed with the proper state authority, and filing fees must be paid.
 

All you need to do is complete the intake order form or place an order by phone and we will prepare and file your certificate of incorporation. It’s simple, just fill out the intake form or call our office at 713-524-1920 to get started.

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Who can form a C corporation?
There are no restrictions as to who can form a C corporation. There are no age, residency or other legal requirements.

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What should I name my C corporation?
Choose the name of your C corporation carefully. It is very important that you portray the image you want for your new C corporation. Legally, the name you select must not be “deceptively similar” to any existing corporation or must be “distinguishable on the record” of your state. For example, if a corporation named Flower Corp. exists in your state, you probably would not be allowed to name your business Flour Inc. It is possible that the name you select will not be available; therefore we ask for a second choice on the incorporation order form.
 

Additionally, the name you choose must show your business is incorporated. Texas requires that the corporate name be followed by a corporate ending such as "Corporation," "Incorporated," or an abbreviation such as "Inc." or "Corp."

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What is double taxation?
Double taxation occurs when a C corporation's profits are taxed at both the entity and individual levels. Profits of the business are reported and taxed at the entity level first. Then, if the C corporation distributes any part of the remaining profits to the shareholders in the form of dividends, the shareholders must report the dividend as personal income and pay taxes on it at the individual level. To avoid double taxation, many business owners choose to make a special election with the IRS to become an S corporation.

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What are authorized shares of stock?
C corporations must indicate the number of shares of stock they wish to authorize (and a par value associated with each share) in the articles of incorporation. The number of authorized shares is the total number of shares available for a C corporation to issue to shareholders; however the C corporation does not need to issue the total number of authorized shares. Some C corporations opt to hold a certain number of un-issued shares in order to add additional owners at a later date or to increase the ownership percentage for a current shareholder. An issued share of stock shows ownership in the C corporation and each shareholder obtains a certificate representing the ownership value of the C corporation.
 

C corporations can alter the number of authorized shares or the par value of shares at anytime in the life of the C corporation by filing an share amendment with the state.

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What is a share’s par value?
The par value of a share is its minimum stated value. Par value typically does not correlate to the actual value of a share. Common par values are $0.01, $1.00 or no par. The actual value of a share is its fair market value, or what someone is willing to pay for a share of stock. For public companies, actual value is determined by the price investors are willing to pay for each share on the national exchange. For private companies, the actual value of a share is typically determined by the overall value of the C corporation or the book value.

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What is the organizational structure of a C corporation?
The organizational structure of a C corporation relies on three basic groups: shareholders, directors and officers.
 

A C corporation is owned by shareholders; however, they do not directly manage the C corporation. Instead, they influence corporate decisions through indirect methods such as electing and removing directors, approving or disapproving amendments to the articles of incorporation and voting on major corporate issues.
 

The directors, who comprise the “board of directors,” are responsible for managing the affairs of the C corporation. Usually, directors make only the major business decisions. They also appoint and supervise the officers, who make the day-to-day business decisions of the C corporation.
 

Officers are responsible for the everyday management of the C corporation.
 

It is important to note that a shareholder may serve on the board of directors and as an officer. In fact, most states allow C corporations to have only one shareholder who also serves as the sole director and officer.

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How many directors do I need to form a C corporation?
Only one director is required in Texas although you are allowed to have more.

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How do I get started with the incorporation process?
After making the decision concerning what entity structure is best for your business, articles of incorporation must be filed with the state government and initial fees must be paid. We can help you satisfy this step.
 

After your certificate is filed, your C corporation must hold an organizational meeting where bylaws are adopted and the incorporation process is completed. Share certificates should be distributed to shareholders and these transactions should be recorded on the C corporation's stock ledger. All of this information should be kept in a corporate record book.

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What is Rush Filing service?
As the quickest way to form your business, the Baba Law Firm offers a Rush Filing Service option to gain state approval of your formation in either the same day (depending on time of order) to 24-48 hours. We strive to complete your order the same day in most situations. This high priority service only costs an additional $79 to your order.

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How soon will I receive my documents?
It is important to note that the 24 or 48 hour filing time is for the formation only. It typically takes longer for the states to produce the filed documents. Once we receive your documents from the state, we will ship them to you via FedEx Overnight delivery. This means you should have your documents in hand anywhere from just a few days to one week after filing.

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Why should I include Rush Filing with my formation service?
Using our Rush Filing service secures your name and filed date in as little as 24 hours. This service is particularly valuable when you need proof of formation to secure a contract or open a bank account.
 

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Entity Comparision
This table provides an at-a-glance reference to how the most common business entity types compare in a number of key characteristics.

Characteristics

Sole Proprietorship

C
Corporation

S
Corporation

Limited Liability Company

Formation

No state filing required.

State filing required.

State filing required.

State filing required.

Duration of Existence

Dissolved if entity ceases doing business or upon death of the sole proprietor.

Perpetual

Perpetual

Dependent on the requirements imposed by the state of formation.

Liability

Sole proprietor has unlimited liability.

Shareholders are typically not responsible for the debts of the corporation.

Shareholders are typically not personally liable for the debts of the corporation.

Members are not typically liable for the debts of the LLC.

Operational Requirements

Relatively few legal requirements.

Board of directors, annual meetings and annual reporting required.

Board of directors, annual meetings and annual reporting required.

Some formal requirements but less formal than corporations.

Management

Sole proprietor has full control of management and operations.

Managed by the directors, who are elected by the shareholders.

Managed by the directors, who are elected by the shareholders.

Members have an operating agreement that outlines management.

Taxation

Not a taxable entity. Sole proprietor pays all taxes.

Taxed at the entity level. If dividends are distributed to shareholders, dividends are also taxed at the individual level.

No tax at the entity level. Income/loss is passed through to the shareholders.

If properly structured there is no tax at the entity level. Income/loss is passed through to members.

Pass Through Income/Loss

Yes

No

Yes

Yes

Double Taxation

No

Yes, if income is distributed to shareholders in the form of dividends.

No

No

Cost of Creation

None 

State filing fee required.

State filing fee required.

State filing fee required.

Raising Capital

Often difficult unless individual contributes funds.

Shares of stock are sold to raise capital.

Shares of stock are sold to raise capital.

Possible to sell interests, though subject to operating agreement restrictions.

Transferability of Interest

No

Shares of stock are easily transferred.

Yes, but must observe IRS regulations on who can own stock.

Possibly, depending on restrictions outlined in the operating agreement.

 
 
 

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