C-Corps Tax Rates and Setup Considerations
When people mention the word corporation, they may be thinking all corporations are the same. That is not the case as there are S-corps, C-corps, and other specialty forms of doing business. However, most Fortune 500 companies along with other big firms are considered a C-corp. It is harder to setup with all the requirements that are involved with qualifications. Setting up the business takes quite a bit of planning.
There are some key benefits about these types of corporations you should be aware of. Also, there are many more reporting requirements for these types of business, so it is best to stay on top of the applicable tax laws or have a CPA on staff to aid in all the taxation issues that may arise. Furthermore, it is important to note that corporations are liable for the alternative minimum tax (AMT) if applicable.
To get the business started you need to file incorporation papers, bylaws, issue stock to owners, and other things before you can even get started as a C Corp. The highest tax rate is currently 35% for corporations, but that can always change so be sure to contact a CPA or the IRS for further information is you have any doubts on the current tax rates. There are other things involving starting the company up that you should be aware of in regards to qualifications. Setting up this type of corporation takes time and patience so do not rush into it unprepared.
Now, going back to the benefits of a C Corp, it is important to note why all the big companies go this way. They do so because of the ease of raising capital (i.e. money). Most times stocks and bonds are offered and sold to investors to get the money to start the company and keep it going before it makes a profit. Large companies will often get millions each time they sell bonds or issue more stock.
Some people are very intimated with all the required reporting requirements with the SEC and also fear issues with taxation and financial reporting. The CEO and CFO can also be held liable under the Sarbanes Oxley Act for signing fraudulent financial statements. With all these important issues it is no wonder why most C Corporations have many CPA's and other financial experts on staff.
On another note, some argue there is a double taxation with this type of corporation. While this may be true if the company pays out dividends to the shareholders, it is often over hyped, since it does not have a huge impact on the majority of shareholders. For large owners, however, this could be an issue to discuss with a tax professional.
In summary, it is important to remember that it takes longer to setup a C-corp than other forms of business, but you can raise large amounts of capital if you need to buy equipment, buildings, or have other large expenses. Be sure to have a qualified individual look at and help with the incorporating process since it can be very complicated and time consuming.