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Tag: C corporation

Business legal services in Silicon Valley

Business Formation: Corporations

Starting a business in California comes with a major decision: choosing the right type of corporation. Entrepreneurs often ask, “What are my options for business formation?” and “Which structure best protects my interests?” Each type of corporation in California comes with advantages, disadvantages, and legal requirements. Lynnette Ariathurai is a California business formation lawyer with extensive experience working with corporations. In this article, you will find an overview of the corporate forms in California.

An Overview of the Difference Types of Corporations in California

C Corporation

If you hear the term “corporation” used broadly, the speaker is often referring to a C corporation. It is the standard corporate business structure in California. Business owners choose this type when they want strong liability protection and the ability to raise capital from investors. A C corporation exists as a separate legal entity. Why does that matter? It means that shareholders are not personally responsible for a company’s debts or other liabilities. Further, the structure allows for unlimited shareholders. That makes the C corporation form attractive for businesses planning to grow, issue stock, or to someday go public. On the other hand, C corporations do face double taxation. They are taxed first at the corporate level and then at the shareholder level when profits are distributed as dividends. Further, overall compliance is more complex than other entities, requiring annual meetings, minutes, and formal record-keeping. If you have any questions about creating a C corporation, our California business formation attorney can help.

S Corporation

The S corporation is another corporate form. It offers many of the same liability protections as a C corporation but provides a different tax structure. Business owners in California often choose this type to avoid double taxation. An S corporation allows profits and certain losses to “pass through” directly to shareholders, who report them on their personal tax returns. There are some cases in which setup can lower overall tax burdens. That is especially true for some small and medium-sized businesses. However, unlike a C corporation, an S corporation comes with strict eligibility requirements. Shareholders must be U.S. citizens or legal residents, and the number of shareholders cannot exceed 100. Further, only one class of stock may be issued. An S corporation still requires formalities such as board meetings, record-keeping, and annual reporting. It can be more expensive to maintain than an LLC. If you have questions about creating an S corporation, our California business formation lawyer can help.

Professional Corporation

A professional corporation in California is a specialized entity designed for licensed professionals such as doctors, lawyers, accountants, architects, and other regulated fields. The state requires many licensed service providers to form professional corporations instead of LLCs or standard corporations. By forming a professional corporation, owners protect themselves from liability for business debts and obligations, while maintaining accountability for their own professional conduct. A professional corporation has similar formalities to a C or S corporation, but the owners (shareholders) and operators (officers and directors), as well as the transferability of the shares are limited to qualified people.

Contact Our California Business Formation Lawyer for Corporations Today

Lynnette Ariathurai is a top business formation attorney. If you have any questions about corporations, we can help. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we provide corporation formation services throughout the Bay Area.

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Business legal services in Silicon Valley

When & Why to Create a C Corporation in California

Are you starting or growing a business in California? One of the key decisions you’ll face is choosing the right business entity. While LLCs and S-corps are popular, some entrepreneurs and investors find a C corporation (C-corp) is the best fit. Below, our Fremont business formation attorney highlights when to consider forming a C-corp in California.

What is a C Corporation?

The California Franchise Tax Board describes a C-corp as a legal structure that creates a separate legal entity from its owners. A C corporation provides strong liability protection and allows businesses to issue multiple classes of stock. Unlike S-corps and LLCs, C-corps are taxed as separate entities. This means the business pays corporate income tax on profits at the corporate rate—and shareholders may also pay taxes on dividends at their individual tax rate (commonly referred to as “double taxation”).

Despite this tax structure, C-corps offer significant advantages in certain situations.

When to Create a C-Corp in California

Deciding whether to form a C-corp should be based on your long-term goals, funding needs, and ownership structure. Here are some scenarios where a C-corp makes the most sense:

  • You plan to raise venture capital or seek investors: Most institutional investors and venture capital firms prefer investing in C-corporations because of their familiarity, predictability, and ability to issue preferred stock.
  • You want to offer stock options or employee equity: If your business will offer employee incentives like stock options or an Employee Stock Ownership Plan (ESOP), a C-corp is often the best—or only—choice.
  • You anticipate rapid growth or plan to go public: If your vision includes scaling nationally or listing your company on a stock exchange, a C-corp is generally the standard.
  • You want perpetual existence: Unlike partnerships or sole proprietorships, a C-corp exists independently of the founders. Ownership can be transferred through stock sales without disrupting business operations.

Examples of Businesses that Work Well as C-Corps

  • Technology Startups and SaaS Companies
    These companies often seek outside investment and plan for scalability, making the C-corp structure ideal.
  • Biotech and Medical Device Firms
    Due to their high capital needs and long development timelines, these businesses frequently structure as C-corps to attract investors.
  • Manufacturing and Product-Based Companies
    Businesses with significant equipment, inventory, and growth potential may benefit from the structure and formalities of a C-corp.

Every Business is Unique—Get Legal Guidance

Creating a C-corp in California requires more paperwork and compliance—but it can open up valuable opportunities. Make sure it aligns with your long-term vision. An experienced business formation attorney can help you evaluate the pros and cons based on your business model, tax situation, and funding goals.

Contact Our California Business Lawyer for C-Corps Today

Lynnette Ariathurai is a California business formation attorney with deep experience forming C corporations. If you’re considering a C-corp, we are here to advise you. Contact our Fremont office today for a confidential consultation. We assist businesses across the Bay Area.

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