Is a C corporation right for your business?
A C corporation is the standard corporate form in the U.S. It is a separate taxpayer: the company files Form 1120 and pays federal corporate income tax at a flat 21% of taxable income under 26 U.S.C. § 11. When it pays dividends, shareholders pay tax on them as well. That second layer of tax is why many small businesses choose an LLC or an S corporation instead.
So why do founders still pick C corp formation? Because a C corporation can issue different classes of stock, grant stock options, take in any number of shareholders from any country, and keep profit in the business at the corporate rate. Our job is to help you decide with the numbers in front of you, then incorporate the company correctly and keep its filings on time. We are a bookkeeping and tax firm in Rochelle Park, New Jersey, and we work with founders locally and online, in English or Turkish. SolutionHub is a private firm, not a government agency, and state filing fees are paid to the state separately from our fee.
C corp vs. LLC
| C corporation | LLC (default tax treatment) | |
|---|---|---|
| Who pays income tax | The company, at 21% federal; shareholders again on dividends | The owners, on their personal returns |
| Owners | Shareholders, any number, any country | Members, any number, any country |
| Investors and stock options | Built for them | Possible, but less familiar to investors |
| Paperwork | Bylaws, board, share records, Form 1120 | Usually lighter |
Founders usually choose a C corporation when they:
- plan to raise money from angel or venture investors, who often require a C corporation, usually in Delaware;
- want to offer stock options to employees;
- plan to reinvest most of the profit instead of paying it out;
- have shareholders who cannot own an S corporation, such as nonresident aliens.
If none of these apply, an LLC in New Jersey is often simpler, and an LLC can later choose S corporation treatment through an S-corp election. Our business formation services page shows all the entity and state options.
What our C-corp formation service includes
Certificate of Incorporation
We check the name, set the number of authorized shares and file the Certificate of Incorporation. In New Jersey the state filing fee is currently $100 (NJ Division of Revenue fee schedule). In Delaware it currently starts at $109, depending on the shares authorized; see our Delaware formation page for how Delaware works for corporations. Every corporation needs a registered agent in its state.
Bylaws and founder shares
Banks and investors usually ask for bylaws, the initial board consent and the share issuance records. Drafting these is legal work, so we can refer you to an attorney for your bylaws and founder share documents.
EIN and state tax registration
We obtain the corporation’s EIN and, for a New Jersey corporation, complete the state tax registration so the company is set up for corporate tax, payroll and sales tax as needed.
New Jersey Corporation Business Tax
A C corporation doing business in New Jersey pays the Corporation Business Tax (CBT). The rate is 9% on entire net income over $100,000, 7.5% between $50,000 and $100,000, and 6.5% at $50,000 or less. A minimum tax applies even in a loss year, currently $500 for New Jersey gross receipts under $100,000, rising to $2,000 at $1 million or more. New Jersey corporations also file an annual report, currently $75.
Delaware C corporations for investors
Most venture investors expect a Delaware C corporation, and incubators and investor documents are usually written for one. A Delaware corporation files an annual franchise tax report by March 1. The minimum franchise tax is currently $175 under the authorized shares method or $400 under the assumed par value capital method, plus a $50 report fee. Be careful with authorized shares: a large number can raise the tax under the authorized shares method, and the other method is often cheaper.
After incorporation
A C corporation needs clean books and a corporate return every year. We keep the records with monthly bookkeeping and prepare Form 1120 and the New Jersey return through our business tax returns service.
Your fee is fixed and agreed before work starts. Book a free consultation to discuss whether a C corporation fits your plans.
