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PKF Texas – The Entrepreneur’s Playbook: C Corporations Part 1

by | Jul 27, 2007 | PKF Texas - The Entrepreneur's Playbook®

Note: Running most Fridays in FromGregsHead.comis a continuing series of tips brought to you by Greg Price. These run Saturday mornings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the Entrepreneur’s Playbook page of the PKF Texas website.

C corporations are organized under the laws of a US state, and ownership is in the form of stock. There is no limit to the number of shareholders or the number of classes of stock. Articles of incorporation must be filed with the state. 

An advantage of C corporations is that shareholders are usually protected from liability for corporate debts. Also, shareholders who provide services to the corporation are eligible to receive tax-free fringe benefits, such as health care benefits, group term life insurance, and may participate in company-sponsored retirement plans.

Disadvantages in using a C corporation include double taxation and administrative requirements.  Profits of a C corporation are taxed to the corporation when earned, and then taxed again to shareholders when distributed as dividends. Tune in next week for the final segment on C Corporations entity selection. Due to complexities in every situation, please be sure to contact your tax advisor when maxing entity selection.

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