How to Start a C Corporation (7 easy steps)

C Corporations are the most common corporation type in the United States today.

This is because you can raise shares, transfer shares, pay dividends, and protect liability, along with a range of other benefits. 

C Corps also offer a real sense of establishment and legitimacy, so many prospective business owners find them an appealing structure for being taken “seriously”.

If you’re wondering how to start a C Corp, this is the article for you.

We’ll cover: 

• How a C Corporation works
• The requirements of a C Corporation
• How to form a C Corp.

The 7 steps to forming a C Corp

1. Register a business name
2. Appoint a board of directors
3. File articles of incorporation
4. Create company bylaws
5. Issue stock
6. Apply for business licenses
7. File an SS-4 form

Because C Corps play by very specific rules and have to meet certain requirements to be legitimate, there are some key steps to forming one. 

In this section, we’ve put together the seven steps to forming a C Corp that you can follow to establish your business in a legally sound, straightforward manner:

1. Register a business name

Wherever you register your business, you must register your business under a unique business name just as you would with an LLC, a sole proprietorship, or any other formal business structure.

This is the first step of registering a C Corp, and you have to do it so that your government can communicate with and regulate your C Corp as a specific and individual entity. 

This name will be the one that exists on all of your legal documentation and tax forms.

2. Appoint a board of directors

Every C Corp must have a board of directors. This is a crucial legal requirement for forming a C Corp, as the board of directors is established to oversee the running of the C Corp. 

They vote on decisions, are required to hold at least one meeting a year, and can be changed, rotated, or otherwise altered as different directors retire and come on board.

The directors of a C Corp have limited liability protection. 

3. File articles of incorporation

Articles of Incorporation are the documents that register the creation of your corporation with your government.

Without these articles, your corporation simply doesn’t exist.

Articles of Incorporation for a C Corp can be more expensive than for other business structures and more complicated, so it is well worth engaging a lawyer to make sure your paperwork is filed correctly.

4. Create company bylaws

C Corps have their own internal laws that regulate the way the business is run and how it is governed.

These bylaws are a legal requirement for any C Corp.

5. Issue stock

C Corps issue stock to shareholders in order to raise capital. Shareholders become part-owners in the C Corp and are able to vote at shareholder meetings. 

C Corps must hold at least one shareholders meeting every year. Selling shares to raise capital gives a C Corp the funds it requires to undertake new projects.

Because C Corps are taxed at a corporate rate separately from profits, shareholders do not pay corporate tax on business profits but do pay tax on their income from dividends.

6. Apply for business licenses

Any business must have the appropriate licenses to conduct business. 

You will need to apply for a business license at every level your business is operating at; local, municipal, and state, your business license is what gives you the authority to trade and operate inside of the legal regulations.

7. File an SS-4 Form

You must file an SS-4 form for your C Corp. An SS-4 is the form that you use to apply for an employer identification number (EIN), which is the number through which your C Corp pays taxes. 

A C Corp pays corporate, payroll, state, disability, and unemployment taxes, so an EIN is necessary to meet those obligations. 

The exact requirements will differ depending on where your business is operating from and what states it is operating in.

Quick Start: If you need to get your C Corp up and running quickly, efficiently, and accurately, you can use a business formation service like CorpNet!

Business formation services do this sort of thing every day, so they are well-versed in the intricacies of C Corp establishment.

C Corporation Requirements

Maintaining C Corp status is contingent on a few strict requirements.

Falling outside of these requirements or lapsing in your adherence to them can see your C Corp fined – or in extreme cases, shuttered.

C Corps pay corporate tax on their profits and then the owners of the corporation pay taxes on their private salaries or dividends drawn from the corporation. 

This is a fundamental feature of a C Corp and is a requirement for keeping C Corp status. 

C Corps also have particular governance obligations that they must keep. C Corps must hold at least one board of directors meeting and one shareholder meeting every year.

They may organize and hold more, but there must always be one a year. 

Further, C Corps are required to publish annual reports each financial year to cover their actions each year.

After a C Corp reaches a certain number of shareholders, it must register with the Securities and Exchange Commission (SEC).

Is a C corporation a good idea?

Whether or not a C Corp is a good idea depends entirely on the nature of your business and your requirements.

A C Corp can require a lot of money to set up, but it can also allow you to manage and scale your business with far greater efficiency and reach than by yourself.

Perhaps you’re thinking of forming a C Corp. If you are, then try asking yourself a few questions about what you need from your business.

• Do you want to be an owner outside of a business or do you want to be on the ground doing work?
• Can you afford to form a C Corp? 
• Is your business something that could reliably generate interest from shareholders? 
• Do you want to continue to operate locally or spread out to other states?

Each of these are good questions to help discern whether forming a C Corp is right for you. 

The fact that you’ve read this article shows that you’ve already done some of the leg work in finding answers to your questions.

You have a solid understanding of how C Corps operate and their functions, so feel free to discuss your plans with a lawyer or potential business partners as your next step.

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