C-Corporations (C-Corp)

In our final edition of the Small Business Series we are discussing C-Corporations (C-Corp).  In Oklahoma, you form an S-Corporation and a C-Corporation the exact same way. It isn’t until after you’ve already formed your company that you have to decide if you want to be categorized as an S-Corp or a C-Corp. The main different between a C-Corp and other business structures is that a C-Corp files and pays corporate income taxes directly. This is because C-Corp’s are considered a separate entity from their shareholders, and must pay taxes on income left over after business expenses. Just like with S-Corp’s, C-Corp’s offer substantial tax benefits.

Operating as a C-Corp can be very beneficial to you if you plan to keep profits in the bank to finance your business functions. By doing this you can take advantage of corporate tax income rates, which are usually lower than personal tax rates. Another benefit to operating as a C-Corp is that you can deduct the cost of certain fringe benefit packages you provide for you employees. Unlike S-Corp’s, C-Corp’s are more flexible and do not have the employee number requirements that S-Corp’s have. This is beneficial for larger companies who cannot operate efficiently under the 75 employee limit, as required when filing as an S-Corp.
You need to be aware of a major downside of operating your business as a C-Corp. With a C-Corp you run the risk of double taxation. A C-Corp can be taxed once as a corporation, and a second time as an individual when you dispense your profits as dividends or when you liquidate the corporation. Another disadvantage of operating as a C-Corp is that they are more expensive than operating as a partnership or a sole proprietorship.
If you are interested in learning more about C-Corp’s or have any questions regarding any type of business structure or law, give Sansone Howell a call at (405) 455-1032 or (405) 550-4564. Or stop by our office at 1212 S. Air Depot Blvd., Suite 19A in Midwest City, Oklahoma.