Austin TX Business Law Blog

Thursday, April 18, 2019

Formation of a C Corporation

The most common corporation type in the United States is a C corporation. The benefits of this corporate structure makes it an attractive option to businesses. A C corporation is owned by its shareholders. The shareholders are charged with electing a board of directors and the board of directors, in turn, determine how the company will operate. The corporation is an entity legally separated from its owners. Which means that the owners carry no personal tax liability. A C corporation can rise to great success as it offers the opportunity for unlimited growth potential through stock sales. This aspect is very attractive to large investors.

There are, however, some distinct disadvantages to C corporations. For one, they are highly regulated. C corporations must comply with regulations put into place at the federal, state, and local levels. Additionally, C corporations are heavy on required paperwork. It can be expensive and time-consuming to keep the requisite tax, business, and financial files in proper working order. It also, especially when compared to other types of business, expensive and complex to properly set up.

How Do You Form a Subchapter C-Corporation?

To form your Subchapter C Corporation, you must first select your business and register it. Your business name must not be the same or substantially similar to another registered business. Next, you will need to both draft and file your articles of incorporation and pay the associated fee. You will need to select your board of directors. This is a very important decision as the board of directors are tasked with establishing how to run the business itself. Once the board has been established, you will want to hold a board of director’s meeting to get started on establishing how the business will run. You must also draft your corporate bylaws.

You will also need to issue stock certificates to the initial shareholders. If you have a publicly held company, you will sell stock shares to the general public. You will also need to publicly disclose financial information of the corporation. A privately held company does not issue stock to the general public and does not have the same obligation to publicly disclose financial information.

Every industry will vary on this, but you must apply for your business license and industry-specific certificates. You will also need to obtain your Employer Identification Number (EIN). You can get your EIN by filing Form SS-4 or applying online with the Internal Revenue Service Website. Depending on what jurisdiction you are in, you will need to apply for and obtain other ID numbers as required by the state and local government agencies. Most business will need tax ID numbers for accounts associated with the payment of unemployment, disability and other payroll taxes.

Texas Business Law Attorney Helping You Start Your Business Out the Right Way

C corporations offer great benefits that can easily make all of the paperwork and legal requirements worth it. The Kumar Law Firm will help you start your business out right. We help you comply with the very specific requirements associated with starting up a C corporation and other business types. Contact us today.

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