For our third installment of the ABC’s for small business, we decided that we liked the letter “C” so much that it had to stay in our word of choice – literally! C-corps are organization structures for businesses that provide non-tax benefits with profits taxed separately from its owners. Beyond just taxing profits separately, c-corps also have the distinction of being separate entities from their owners entirely in both control and management and as such, may go public and raise investment capital, engage in business, and initiate lawsuits.
Last March we did a post on C-Corp 101 and the four considerations to making your business tax efficient, provided below for a quick recap:
1. Pass through of gains
2. Pass through of losses
3. Transfer of assets to the entity, and
4. Transfer of assets from the entity
Let’s focus on some of the benefits mentioned earlier with having a C-Corporation, particularly where taxes are concerned.
Limited Liability
If you own a c-corp, you are not personally liable for the debts that your corporation incurs. This is extremely important because it means that you can’t be sued for what goes on within the company or lose all of your personal assets in the process.
Benefits = Business Expenses
If you want to give your employees health insurance packages and dental plans, you can write off these benefits as business expenses and even ensure that they arrive tax-free!
Auditing?
By forming a c-corp, as opposed to a sole proprietorship or LLC, you’re at a much less risk of being audited by the government than your counterparts are.
Unlimited Stockholders
An unlimited amount of stockholders allows your corporation the ability to sell shares to more investors increasing the amount of funding you receive in return.