CORP

C-Corp Structure

Understanding the distinctions between the Corp and LLC

models when starting a company in the U.S. is crucial. Each type has its own characteristics and advantages depending on the specific goals of the business.

The Corporation structure requires a hierarchy of shareholders, directors, and officers. There are two types of Corporations: S-Corp and C-Corp. While the former requires members to be legal residents of the United States, the C-Corp allows members from other countries to participate.

Regarding taxation, the C-Corp model is subject to federal and state income taxes. The rate can vary depending on the state. However, personal income tax is only applicable if profits are distributed, which is not mandatory for a C-Corp. One significant tax advantage of the C-Corp model is the ability to carry forward losses from one year and deduct them in subsequent years, thus reducing the tax burden.

Additionally, a C-Corporation can establish credit in the company’s name, unlike an LLC, which relies on the credit history of its members, which can be challenging for non-residents of the United States. Establishing a C-Corp in the United States is an excellent option if the goal includes attracting investments, as this model is better suited for securing external financing.

However, a significant disadvantage is double taxation: corporate taxes (federal and state) are paid first, followed by personal taxation on distributed profits.

Similarities between C Corps and LLCs:

  • Both can be transferred to other entities or individuals, following each state’s specific regulations.
  • Both C Corps and LLCs have an indefinite duration, not requiring dissolution in cases of member absence or death.
  • LLCs can convert into C Corps and vice versa, according to state regulations. Additionally, both can be transferred to another state.
  • These two models offer partial liability protection to individual members in cases of litigation or financial difficulties.

Understood the distinctions?

Now that you are aware of the differences between the models, you can trust Alxport Business Solutions to establish your company in the United States simply, quickly, and securely.

Just fill out this form with all the necessary information to receive our support in starting your company. If any questions arise and you need to speak with one of our consultants to better understand which model is best for your business, don’t hesitate to contact us.

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