Are you a non-resident in the US who failed to establish S-corp but still dreams of launching a successful business in the US market? Or you are one of those who are seeking opportunities for investment from international sources? Then, forming a C corporation might be the perfect solution for you.
However, forming a C Corp comes with lots of difficulties with legal obligations. But, don’t be stressed! You are in the right place! Our step-by-step guide will equip you with the knowledge to form a C Corp confidently.
Ready to unlock the full potential of your US business? Let’s explore…
What Is the C Corporation?
C Corporation is referred to by the acronym “C Corp.”
This is a legal business structure in which the owner or shareholder’s income is taxed separately from the entity under Subchapter C of the US Internal Revenue Code.
Similarly, a C Corp is a corporation treated as a separate entity from its owners and subject to corporate income taxation itself. Importantly, this legal structure continues to exist even if there are changes in ownership. The residency status of the owner doesn’t impact the existence of the C Corp, unlike the S Corp.
Simply put, a corporation is the most popular type of corporation in the US, that taxes separately from its members.
There is a list of C corporation companies given below:
- Walmart,
- McDonald’s,
- Microsoft Corporation,
- Apple Inc.,
- Amazon.com Inc.,
- The Coca-Cola Company,
- Starbucks etc.
C Corp Example
Consider Alex, a tech entrepreneur from Germany who aims to expand his innovative software startup into the US market. Alex faces challenges with forming an S Corporation due to the residency restrictions, so he opts for a C Corporation instead.
By forming a C Corp, Alex can attract international investors without any restrictions on shareholder residency. This flexibility is crucial as he secures funding from venture capitalists in Europe and the US.
Additionally, the C Corp structure allows Alex to offer multiple classes of stock, making it easier to incentivize key employees and attract top talent with stock options. This is essential to his startup’s quick growth.
Moreover, Alex benefits from the C Corp’s perpetual existence. Even if he decides to relocate back to Germany, the corporation continues to operate independently, ensuring stability and continuity for his business.
Choosing a C Corp over other structures enables Alex to navigate the US market efficiently, leverage international investments, and sustain long-term growth, all while maintaining legal and financial protections for his personal assets.
C Corp Advantages
Continuing from Alex’s journey, let’s explore the compelling advantages of choosing a C Corporation for your business.
Limited Liability Protection
One of the key benefits of forming a C Corp is limited liability protection. Owners or shareholders are usually not personally liable for the debts and liabilities of the corporation. This protects their personal assets.
Access to Capital
Selling stocks is a more convenient way for C Corps to raise money. Investors and venture capitalists find this structure appealing.
Perpetual Existence
C Corporations have a distinct advantage in their perpetual existence. This stability is particularly beneficial for non-residents who may relocate.
Attractive to Investors
C Corporations are often more appealing to investors due to their structured management and potential for growth.
Tax Benefits
While C Corps faces corporate taxation, they also offer unique tax advantages.
Employee Incentives
C Corps can offer stock options and employee benefits, which can help attract and retain top talent.
Depending on profits, C Corps may benefit from lower corporate tax rates compared to personal tax rates.
Enhanced Credibility
Lastly, the C Corps enhances credibility and professionalism with customers, investors, and suppliers by establishing itself as a legally recognized business.
Ownership Flexibility
Shares of a C Corporation can be easily transferred without affecting the business’s operations.
From unlimited growth potential and investment opportunities to legal protections and tax benefits, the C Corp structure empowers entrepreneurs to navigate the complexities of the US market confidently, ensuring a solid foundation for future success.
C Corp Disadvantages
While starting a C Corporation comes with several pros, there are also notable cons that business owners should consider before making a decision.
Double Taxation
C Corporation is subject to double taxation on its dividends to shareholders as well as corporations. A larger tax obligation may result from this. Here are some ways you can avoid double taxation.
Complex Structure
C Corps have a more complex structure with formalities like board meetings, minutes, and shareholder voting, increasing administrative burden.
Cost of Formation and Maintenance
Higher initial formation costs and ongoing compliance expenses (legal fees, annual reports, etc.) compared to simpler business structures.
Less Control for Owners
In larger C Corps, shareholders may have less direct control over business decisions, as management often operates independently.
High Taxes
Depending on the income level, C Corps may face higher overall tax rates compared to pass-through entities.
Limited Loss Deduction
Shareholders cannot deduct business losses on their personal tax returns, unlike other structures such as S Corps or LLCs.
State Taxes
Some states impose additional taxes on the C Corps, which can affect overall profitability.
These disadvantages should be carefully considered when deciding whether to form a C Corp.
Requirements to Form a C Corp
Once you decide to start a C Corp in the US, you just need to ensure the following requirements state-wise:
- A Business name.
- Registered Agent.
- Directors.
- Articles of Incorporation.
- EIN.
- Operating Agreement.
- Business Bank Account.
How to Form a C Corp
At this point, you may be overwhelmed by thinking about how to start a C Corp by ensuring legal compliance with state and federal regulations, right?
Forming a C Corporation in the US involves several key steps:
- Choose Your Business Name
Start by selecting a unique name for your C Corporation that complies with state regulations. The name should not be similar to any existing businesses in your state and must include “Corporation,” “Incorporated,” or an abbreviation like “Inc.” - Appoint a Registered Agent
Once your business name is chosen, then assign a registered agent for your C Corp. This can be a person or business that receives legal documents on behalf of your corporation. This role is crucial for maintaining communication with state authorities.
You can serve as your own registered agent or appoint a professional service like Business Globalizer. - Appoint Directors
Next, appoint the initial directors who will oversee the corporation. Most states require at least one director, and they can be individuals or other businesses. Directors will be responsible for making significant decisions and guiding the corporation. - File Articles of Incorporation
In this step, prepare and file your Articles of Incorporation with the appropriate state agency. This document typically includes essential details such as the corporation’s name, registered agent, purpose, and the number of shares authorized for issuance. Filing fees vary by state. - Obtain an EIN
An Employer Identification Number or EIN is important for tax purposes and to open a business bank account. You can apply for an EIN through the IRS website, which is free and straightforward.
To obtain an EIN, you may also take the help of a professional IRS-certified acceptance agent. - Create an Operating Agreement
Although it is not always needed by law, it is a good idea to write up an operating agreement. This document outlines the management structure and operational procedures of the corporation, helping to prevent disputes among shareholders. - Draft Bylaws
Bylaws are the internal rules that govern your corporation’s operations. They cover procedures for meetings, voting, and other essential aspects of corporate governance. Having clear bylaws helps maintain order and compliance within the corporation. - Hold an Initial Board Meeting
After forming your corporation, hold an initial board meeting to discuss important matters such as adopting bylaws, appointing officers, and setting the corporation’s fiscal year. This meeting should be documented in the meeting minutes. - Issue Stock
Once the corporation is established, issue stock to the initial shareholders. This formalizes their ownership and provides them with rights in the company. Make sure to maintain accurate records of stock issuance. - Obtain Necessary Permits and Licenses
Depending on your business activities and location, you may need specific permits or licenses to operate legally. Research local, state, and federal requirements to ensure compliance. - Register for State and Local Taxes
Don’t forget to register for any state and local taxes that may apply to your corporation. This can include sales tax, franchise tax, and employment taxes. Checking with your state’s tax authority will provide clarity on your obligations. - Open a Business Bank Account
Opening a dedicated business bank account is crucial for separating personal and business finances. This helps maintain liability protection and makes accounting easier. - Stay Compliant
Finally, staying compliant with ongoing regulatory requirements is essential for maintaining your C Corporation status. This includes filing annual reports, paying taxes, and holding regular board meetings as stipulated in your bylaws.
By following these steps, you can confidently navigate the formation process of a C Corporation, setting a strong foundation for your business in the US.
Can a Non-US Citizen Own a C Corporation?
After learning the steps of C Corp formation—the first question that may come to your mind as a non-resident is whether you are eligible to form a corporation, right?
The answer depends on your residency status. If you are a non-resident or don’t hold a long-term lawful permanent residency like a green card, you can only choose business setup options for C Corp. You can’t set up your business as S Corp in the US.
So, Yes! You can own a C Corp by following all the regulatory obligations of business formation as a non-US citizen.
Required Documents for Non-Residents
Now, you may wonder if there are any requirements to form a C corp in the US. As it’s wise to choose a company formation service provider, the requirements may vary on the service provider and the state you choose. Basically, the following documents are needed mostly:
- Passport Scanned Photocopy/Smart NID/Driving license/any kind of Govt. issued ID.
- Bank Statement for last 3 months/ Uitility bill copy of the applicants.
How Business Globalizer Can Help You?
Struggling with the complexities of forming a C Corporation on your own? Let Business Globalizer simplify the process and set your business up for success in the US market.
Contact us, make a payment, and provide the necessary information along with business details in the provided form in just a few minutes. We’ll incorporate your company in your chosen state, obtain your IRS tax ID for business (EIN), and ensure all necessary legal documents are in place. You can effortlessly issue stock, draft bylaws, and create an operating agreement with our help.
We also assist with opening a business bank account, registering for federal, state, and local taxes, and obtaining required permits and licenses. Our expert team guides you every step of the way, ensuring full compliance with legal requirements.
FAQs on How to Form a C-corp
Q1: How much does it cost to start a C-corp?
Answer: The cost of starting a C-corp varies by state and the company formation service you select.
Q2: Can one person form C Corp?
Answer: Yes, a single individual can form and run a C Corp in the US, by following state regulations.
Q3: Is an LLC the same as a C Corp?
Answer: No, an LLC and a C Corp are different business structures with distinct legal and tax implications.
Q4: Can anyone own a C-corp?
Answer: Yes, anyone, including non-residents, can own a C Corp.
Final Words
Ready to form a C Corp and expand your business in the US? Forming a C Corporation comes with significant advantages, such as limited liability and growth potential, but it can also be complex.
That’s where Business Globalizer comes in. We simplify everything, guiding you through each step—from incorporation to compliance—so you can focus on what you love: growing your business.
Start your journey with Business Globalizer today!
