Colorado Business Structures: Choosing A C Corporation For Your Startup
When it comes to choosing a corporate structure for your new business venture, it is easy to get overwhelmed. Let our experienced business startup lawyers at the Law Offices of Clifton Black, PC, in Colorado Springs help you understand the different options and walk you through the advantages and disadvantages of each.
What Is A Corporation?
A corporation is a registered business entity that is considered a “person” under the law. It is owned by shareholders who own shares of stock in the corporation. This means that when a corporation is properly registered and operated, the shareholders are not personally liable for its debts or most acts. Corporations have more formalities than other business entities like sole proprietorships and limited liability companies.
What Are The Key Features Of A C Corporation?
When you choose to form a company as a C Corporation, you are opting for a business structure with distinct advantages. C Corporations have a unique ownership and management structure. They can have an unlimited number of shareholders who own the corporation through shares of stock. This makes it easier to raise capital by selling shares to investors.
The Management Of A C Corporation
Management in a C Corporation is handled by a board of directors. The board oversees the major decisions and appoints officers to manage day-to-day operations. This clear separation between ownership and management can simplify running your business.
A C Corporation And Its Perpetual Existence
A key benefit of a C Corporation is its perpetual existence. Unlike other business structures, a C Corporation continues to exist even if an owner leaves or sells their shares. This provides stability and can make long-term planning easier.
Transferring Shares In A C Corporation
Another advantage is the transferability of shares. You can sell or transfer your shares without affecting the corporation’s operations. This flexibility can be attractive to investors and can help you plan your exit strategy.
How Do You Form A C Corporation In Colorado?
You can form a corporation in Colorado by visiting the Colorado Secretary of State website. As a C Corporation, you are choosing a formation for a “for-profit” organization. An experienced business formation lawyer can help you draft your corporate bylaws or rules that will govern and regulate your new company.
The bylaws also set forth the rights of the stockholders and provide guidance to the board as to how the business will be conducted. Bylaws are extremely important and should be written in a manner that, when followed, will protect the board of directors, officers, and stockholders from personal liability. Legal requirements for what the bylaws should contain can vary by state.
Corporate Taxation: What You Need To Know About Income Tax
Corporations are required to pay federal, state, and local taxes. A regular corporation (C Corp) is its own legal entity under the law and, therefore, pays income tax based on the profits of the corporation. One of the major drawbacks of operating as a corporation (C Corp) is that there is double taxation.
The corporation is taxed on its profits and then the stockholders are taxed on dividends. Also, employees, which can be shareholders, are taxed on income. To avoid double taxation, it is worth considering if the business is eligible to make a Subchapter S election and file as an S Corporation instead. An experienced business law attorney can help you understand the nuances of the different corporate structures and tax consequences.
Consult A Colorado Corporation Formation Lawyer
At the Law Offices of Clifton Black, PC, our attorneys and lawyers are here to help you navigate the complexities of forming and maintaining a C Corporation. Contact us to discuss how this structure can benefit your business.
You can reach us by calling 719-328-1616 or by sending us an inquiry through our contact form.