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C Corporation Questions

C Corporations are corporations that are taxed apart from the owners under the United States federal income tax law. Most of the major companies in operation today operate as C Corporations for tax purposes.

C Corporations are owned by its shareholders. The share holders elect members of the board of directors who are in control of decisions within the company and govern company policies. Another benefit of a C corporation is the limited liability for the owners. This means the owners cannot be held liable on a personal level for any debt that may result from the corporation. They have protection from law suits incurred by the corporation. Take a look at the C Corporation questions that have been answered by experts.

How does a C corporation change to a non for profit association? Would it have to liquidate and then incorporate as a non taxable entity?

Liquidation isn't necessary when a C Corp becomes a 501c corp. The C Corporation will need to file the necessary documentation with the IRS for a 501c status and express their charitable expectation under the IRS guidelines. As long as the corporation follows their company by-laws in regards to issuing stock, the company can hold the shares within the company. Many companies choose to apply shares of company stock for the benefit of the company members and don't issue shares to non-members.

If a C Corporation is sold in 2009 and all corporate tax information went to the new owners. Who is responsible for the company tax information in the event the IRS wants to audit the corporation's 2008 tax year? The IRS cannot contact the new owners and they want use to produce the tax information of 2008.

You were still in control of the corporation in 2008 and your name appears on the IRS tax files for 2008. It doesn't matter that you sold the corporation along with all rights and liabilities to the new owner. Your name appears on the tax year in question and was filed by your corporation. The IRS can come after you for the documentation. The new owner may have taken on the Corporation; however, the new owner had nothing to do with the corporate taxes for 2008.

You should consider hiring an attorney to assist you during the audit. The attorney may be able to work out a deal with the IRS as well as the tax documents for the year in question.

The fact that your name is on the IRS files would make you liable. If the audit results in losses, you may be able to sue the new owner for the losses stemming from the audit. At this point, your best option would be to work with the IRS and produce the tax records. By not complying, the IRS can pursue you legally. The IRS could not only sue you for the funds, you could possibly face charges of tax fraud and tax evasion. To avoid this from happening, you need to be a willing participant in the audit and provide the tax records to the best of your ability.

I have a C Corporation and I have refinanced an additional $100,000. How can I take this out of the C Corporation without any tax liability? Can I use my Stocks in the company that has a security?

If you take a loan from the corporation and treat it like loan and repay the money, there shouldn't be an issue. If the loan is treated like a repayable loan, it isn't income or taxable. You should draft a loan agreement that will enforce the validity of the loan. Furthermore, the board of director's should approve this type of loan before it occurs and there should be a payment plan with an interest rate included.

Under a registered DBA of our C Corporation we opened a book store in 2009. A vendor of the book store has filed a Small Claims court law suit against us personally. Since a corporation is supposed to protect us from such things, do we tell this vendor that he is suing the wrong entity?

There is no need to notify the plaintiff of anything. You need to file Motion to Dismiss, improper defendant. In the Motion, you need to state that the vendor's legal relationship is not with you, but with the Corporation. Once you complete the Motion, you will need to file the response with the court, forward a copy of the Motion to the vendor, then appear in court on the set date to argue the suit based on the vender suing the wrong legal entity. While you can do this without the assistance of an attorney, it is generally a good idea to have a legal professional in your corner. The attorney's fee will depend upon the individual and will vary in cost. You should speak with several attorneys before you decide on which one you like and what you can afford.

When a person starts a business, they need to decide how the business will be set up. There are different types of business titles for different business needs. With so many options, before choosing a business title, you should ask an Expert for assistance in choosing the right business title for your company.
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