C-Corporation

Advantages of the C-Corporation

A corporation is a citizen in the state wherein it was created and does not cease to be a citizen of its state of domicile by engaging in business or acquiring property in another state. Since corporations are solely creatures of Statute, their powers are derived from the constitution and laws of the state in which it is incorporated. As an artificial person, a corporation is considered to have its domicile in the state where it is incorporated and the place where it has a statutory presence.

For the purposes of raising capital and building credit for a small to medium sized business, corporations provide the best chances for gaining approval and are recommended.  A corporation is a separate legal entity from the owners and officers of the business.  It files a SS-4 form with the Internal Revenue Service to obtain a tax identification number that will be used to file taxes and can be used to create the company’s own credit profile. The following illustration is an example of how with a corporate entity the personal life of a business owner is separated.

Corporations are the oldest business entity in the United States and have the most case history.  Credit card companies have designed credit cards just for corporations.  Venture capitalists and banks will spend more time with the owners of a corporation then that of a sole proprietorship.  Corporations are taken more seriously in business.  Some companies will not hire another business unless it is incorporated. 

There are several types of corporations, but the two that are most commonly used are the “S” and “C”.  To decide which of the two is best for your situation consult a tax professional.

A Corporation when filed with the state uses Articles of Incorporation.  At the point of filing the document a C-Corporation has been created.  To change to a S-Corporation a form 2553 must be filed with the IRS and any some states require separate forms to be filed as well.

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