Why form an C-Corporation?
Chances are you’ve considered the key benefits of forming a C-Corporation (general for profit corporation):
- Secure your personal assets through liability protection
- Set up a structure so that you can accept money from investors
- Provide for the issuance of stock in your company
- Deduct certain expenses
- Reduce audit risk
- Establish credibility with customers
In summary, a C-Corporation (or C-Corp) has the following benefits:
- A C-Corporation provides liability protection. One of the most important features of a corporation is the separation of the personal assets from those of the business. When someone opens a business, they want to make sure that if credit or debt issues arise or if something happens to the business that this does not impact the individual business owners. You also want to make sure that the liabilities associated with more than one owner do not impact the other owners. Separation of business and personal assets of the owners is critical.
- A C-Corporation provides a structure in which investors can invest capital. Investors, bankers and other parties interested in taking on ownership of your business will likely require that the business be a C-Corporation. This is a structure with which investors and acquirers are familiar. If you anticipate selling ownership in the business or raising capital for your business, a C-Corporation is an entity type you should consider.
- C-Corporations provide a formal structure for your business. When you have a formalized corporate entity with the Articles of Incorporation and relevant corporate paperwork established, it enables the business owners to formally structure the business, establish a framework for the business and maintain the proper documentation in the event of acquisition and third party investors. Establishing the proper corporate structure at the outset sets the business up for long term success.
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