Hi and welcome to the tax implications podcast with Sam Hicks

This is your short form podcast covering the items that affect your bottom line

Thank you for tuning in. Today I’ll be discussing how an C Corporation might be the most suitable form of business for a new venture.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening.

A C corporation allows the business to be treated and taxed as a separate entity from you as the principal owner. A properly structured corporation can protect you from the debts of the business yet enable you to control both day-to-day operations and organic corporate acts such as redemptions, acquisitions, and even liquidations.

In order to ensure that the corporation is treated as a separate entity, it is important to observe various formalities required by your state. These can include filing articles of incorporation, adopting by-laws, electing a board of directors, appointing a resident agent, holding organizational meetings and keeping minutes of those meetings.

Since the corporation is taxed as a separate entity, all items of income, credit, loss, and deduction are computed at the entity level in arriving at corporate taxable income or loss.

A C corporation can also be used to provide fringe benefits and fund qualified pension plans on a tax-favored basis. This is subject to certain limits, but the corporation can deduct the cost of a variety of benefits such as health insurance and group life insurance without adverse tax consequences to you. Similarly, contributions to qualified pension plans are usually deductible but are not currently taxable to you.

A C corporation also gives you considerable flexibility in raising capital from outside investors. A C corporation can have multiple classes of stock—each with different rights and preferences that can be tailored to fit your needs and those of potential investors.