Whether you have been doing business for years or are just starting a new endeavor, choosing the correct legal designation for your business could improve your bottom line. The C Corporation (C-Corp) is an effective choice for many entrepreneurs because of the tangible benefits such a form offers but selecting an entity requires evaluating several options. When restructuring your existing company or starting a new enterprise, a Minnesota C corporation lawyer could help you through every aspect of forming a C corporation allowing you to focus on running your business.
Benefits of Forming a C Corporation
Often, C corporations are formed to take advantage of many unique advantages over other forms of incorporation that might be the most optimal and efficient for specific companies.
How is Liability Limited in a C Corporation?
Often the most attractive feature of a C corporation is that it limits liability to owners known as shareholders. Ordinarily, the liabilities of a sole proprietorship or partnership fall on the owners personally. This means that creditors can seize the personal assets of owners to settle the company’s debts. However, C corporations limit owners’ liability to the amount they have invested in the corporation through the purchase of stocks. The corporation can only lose what assets it has, including money paid by shareholders for stock or equipment to run a business. Once the corporation is out of money, creditors are unable to pursue shareholders for any deficit.
How are C Corporations in Minnesota Funded?
Corporations are unique in that they may raise massive amounts of capital through the sale of stocks. There are essentially two ways stocks are traded, only one of which directly benefits a corporation. The first is the sale of stock by the corporation itself. Typically, these are done during Initial Public Offerings (IPOs) and serve as the fundraising mechanism where money paid for shares goes directly into the corporation’s coffers, which it can then use to fund projects and purchase assets. Stocks may also be traded through public secondary markets like the New York Stock Exchange, Dow Jones, or Nasdaq. Although corporations have an interest in its stock price on public exchanges, the sale of stocks on the market are paid between a buyer and seller and not to the corporation.
Legal Requirements to Form a C Corporation
Because a C Corporation has such attractive features, there are stiff legal requirements to form and maintain this type of incorporation. Failure to comply with these requirements could result in a loss of liability protection and the owners of the corporation may then be personally accountable for the conduct of the corporation. The following are a few important factors a corporation will need to meet:
- File Articles of Incorporation with the Secretary of State in the chosen incorporation state. Every state has different incentives for creating a corporation in that state.
- Create and issue the stock to stockholders.
- Appoint a board of directors and assign or hire executive officers.
- Hold Annual General Meetings (AGMs) for shareholders and the board of directors to discuss current and future projects for the corporation.
- Maintain other legal requirements, including treating the corporation’s assets independently from shareholders.
Failure to comply with some of these requirements, especially treating shareholder and corporate funds as one and the same, could jeopardize the liability status of the corporation. It could be difficult to ensure that all these requirements are satisfied but a C Corp attorney in Bloomington may be able to provide guidance.
Discover How a Minnesota C Corporation Lawyer Could Help
Creating a C corporation is a complicated process but the rewards could help your business maximize profits while minimizing risk. A Bloomington C Corp attorney could guide you through the process and make sure that your business is formed correctly ensuring that your business complies with all legal requirements to protect your personal assets. Do not wait, call today and get started.