The California C Corporation is the standard model for California businesses. While it is not a very flexible structure option for some business entities, the C Corporation typically provides the most thorough protection for shareholders of the corporation.
The California C Corporation has a defined structure that may be a necessity for your business if you are searching for financing for your company. Through a C Corporation, shares are issued and each shareholder becomes an owner in the business. Multiple classes of shares come with their own restrictions and counter acting benefits. Shares of the corporation can be sold. The corporation can also issue new shares as necessary.
Requirements for the California C Corporation under California Law:
- A C Corporation is required to have a minimum of three directors (unless there are less than three shareholders).
- If a C Corporation has less than three shareholders, the number of directors must be equal to or greater than the number of shareholders.
California C Corporations offer business owners advantages in relation to how and when they pay taxes. C Corporations are taxed as separate entities from owners. This means that they do not undergo pass-through taxation. Instead the corporation’s income is taxed before it is divided amongst the shareholders. As a result, most taxes are paid at the corporate level instead of being passed through to the shareholders. Income passed along to shareholders is taxed again when they file their own individual tax returns after they receive their dividends. This is referred to as double taxation and is avoided through the S Corporation or California LLC.
If you need additional information regarding which corporate or LLC structure would best suit your business’s needs, contact the southern California business attorneys at The Law Office of Retz & Aldover LLP.