The Big "C". In the beginning of this article I asked the question how can people that make millions of dollars a year in income pay no taxes. I left you hanging on the answer to that question........Until now. The C corporation is the big boy of legal structures. When it comes to maximum asset protection, benefits packages, and maximum protection from the tax collectors nothing beats the C corporation. The C corporation is made up of shareholders. The shareholders are the actual owners of the corporation and profits are distributed in proportion to the amount of ownership. The major benefit of the C corporation that allows the rich (and now you) to make all of the money you want and avoid paying taxes on it is the fact that there is no limit to the business related tax deductions that can be taken by the C corporation.
Any thing that you spend money on that is related to the business is tax deductible. If you decide to use this entity you will find out when you consult a corporate attorney that the interpretation of business related is a very loose one. You can literally spend your tax obligation down to zero. Rather than give the government their hard earned dollars they just spend the money on things that are tax deductible and beneficial to the company at the same time and then they just write it off. What you have to understand is that these companies are not evading taxes (which is illegal) they are avoiding them (which is perfectly legal).
The next major advantage of the C corporation is the generous benefits packages. From tuition reimbursement to health insurance, everything is covered with pre-tax dollars. The C corporation is also the go to entity for bringing investors into the company. If your dream is to go public one day then the C corporation is the entity for you. The downside to the C corporation is the double taxation. The earnings of the C corporation are taxed at the Corporate level and then once again at the shareholder level when the dividends are distributed. This is only a minor annoyance for savvy corporations because as I said before they just spend the tax obligation of the corporation itself down to zero thereby eliminating the corporate tax. With that being said that is a downside that can be avoided.
The major downside of the C corporation that can not be avoided is the fact that a C corporation can be costly to start and operate. There are companies that will form your C corporation for cheap or you can do it for free but the cost will come when it is time to abide by the corporate formalities that allow you to do business as a corporation. In business time is money and you will either pay with your time when trying to do it yourself or you will pay out of your pocket for professional help. Overall the C corporation is one of the best entities. If not the best.