A budget for fiscal 2020-21 has been unveiled by the Honourable Finance Minister of India, which promises to boost Indians' incomes and purchasing power. The goal is to revive domestic economic growth that has slowed to its lowest level in a decade. Businesses can reap benefits from registering their business as a C Corporation in the US, but there are also drawbacks. It is essential that business owners weigh the pros and cons before registering the firm. This article helps owners understand all the merits and demerits of it.
There are so many advantages and disadvantages of operating a C-Corporation, and it is important to know about all of the advantages and disadvantages of operating a C Corporation before incorporating a business in the USA.
Advantages of Operating a C Corporation
There are many profits by operating as a C Corporation, and possibly the most significant benefit of all is the fact that C Corporations provide shareholders with the limited liability in terms of the business losses. Since the C-Corporation operates as a separate and different legal entity, the owners and the shareholders of the corporation cannot be held for liabilities or losses sustained upon the business. Also, if legal action is brought against the C Corporation, the plaintiffs cannot go after the owners or the shareholder’s personal assets.
When thinking about the limited liability advantage, one should know that such advantage applies to all the directors, shareholders, officers and employees of the corporation.
It is very easy for a C-Corporation to attract investors, as there are probabilities for an unlimited number of investors in the company. The C Corporation can also issue an unlimited number of shares. However, if the C Corporation has 500 or more shareholders and $10 million in assets, the company should register with the SEC. A C Corporation can remain in the business even after the original owner leaving the business. This is because of the fact that the corporation operates distinctly from any and all owners.
C Corporations tend to have greater credibility when procuring financing as well as working with the suppliers and other vendors. They can also deduct business expenses along with the employee benefits during tax season. C Corporations are also involved in the income splitting, also known as profit splitting and loss splitting, which basically means that the corporation can split the profits and losses between the owners and the business, ultimately leading to decreased tax rates.
Disadvantages of Operating a C Corporation
While there are many advantages to operating a C Corporation, as mentioned above, there are also disadvantages in the operation of any other business structure. It is important to understand the disadvantages before choosing to operate a C Corporation. For some, the disadvantages may outweigh the benefits.
The C Corporation is taxed at the corporate level and the owners of the company are taxed on the dividends paid from the corporation. Therefore, the corporation will pay the corporate income tax, and the shareholder agreement and owners will pay the personal income tax on such dividends.
If the business itself does not need to raise the capital through the shares, then people generally find that operating an S Corporation offers for decreased taxes.
C Corporations are generally regulated more, as they should hold a number of periodic meetings, including regular shareholder meetings and board meetings. Minutes of the meetings from each of these meetings are also obligated to be kept on file. Government oversight of C-Corporations is high due to the compound tax laws and greater protection provided to owners of such corporations.
C-Corporations should pay several federal and state filing fees when incorporating. Further, corporations should abide by both state-level and federal regulations, which result in the need for professional help, whether it be an accountant or attorney. C-Corporations also cannot deduct for their corporate losses, rather, the losses should be reported on the shareholder’s personal tax returns.
Conclusion
Those are the advantages and disadvantages of operating a C corporation. C Corporations have several advantages, including limited liability for shareholders, attractiveness to investors, and the ability to issue an unlimited number of shares. Corporate and owner taxation, as well as regular shareholder and board meetings, are some of the main disadvantages.
Frequently Asked Questions
Why do we file income tax returns?
All the individuals must pay the income tax and file tax returns to avoid fall foul of the Income tax Department. Filing returns is also essential for VISA processing. Learn More about Income Tax filing.
How is ESI PF calculated from salary?
As the employee’s basic payment is above ₹.6,500, the PF contribution is calculated as 12% of the salary. An employee gets ₹.3,000 as basic pay and ₹.3,000 goes under special allowance. More info on ESI registration
Who needs to register with FSSAI
FSSAI registration is compulsory before the startup of a food business. All the Food Business Operators(FBOs) who are involved in food business should obtain a food license or 14-digit registration number printed on food products. More information on FSSAI.
What is the use of ISO certification
ISO certification assures quality and this is an important aspect for customers. So, you meet customer satisfaction with your products and services. More on ISO Certification.
What is the threshold limit for TDS on rent?
With the revision of TDS on Rent limit to ₹. 2,40,000 per annum, there is relief to those who rely on rental income as they need not pay tax for the rent. Details on TDS Return Filing.
How do you check if a name has been trademarked?
Different search tactics to search for the registered and unregistered are: quick screening search, fictitious name database, registered trademark. , unregistered business names, etc. Details on Trademark Registration.
Who can avail MSME loan?
MSME loans were introduced by the government of India in 2018 to support such businesses. And, these fast loans can be obtained in one hour. Learn more about SSI/ MSME Registration.
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