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Who Should Pick C Corporation?

  Sanjiv Gupta CPA  Published 
Who Should Pick C Corporation?

This is a very common question asked by our readers.

Who should use a C Corporation as a business entity?

You should pick a C Corporation if you:

  • Have noncitizen or green card shareholders.
  • We might look for additional funding from venture capital firms.
  • Want a flexible way of splitting profit among business owners.
  • Want to reduce medicare and social security taxes by setting up salaries for employees and/or owners.
  • Want to provide fringe benefits to owners. E.g. life insurance, education, and transportation costs.
  • Want to provide health benefits (through your corporation) to your employees and owners.
  • Want to reduce your taxes by splitting your earnings between your shareholders and the corporation.
  • Want your business earning to stay within your business so that it can grow.
  • Want to transfer your share among other business partners/shareholders.
  • Want to provide stock options to employees as a benefit.
  • Want to make it easier for someone else to purchase your business.
  • Want to provide a travel and entertainment benefit to your employees.

These are some of the key reasons why you should pick a C Corporation as your business entity. However, you should consult with a professional before setting up your business structure.

A good consultant can advise you to ensure your business structures provides good asset protection and reduce your tax liabilities.

Make sure to understand the requirements of the business structure.  For example, C Corporation requires a business owner to hold the annual meeting and keep the meeting minutes.  You can lose your protected corporation status if you fail to follow the requirements.