C Corporations are ideal for small businesses which have future growth plans. Corporations are formed by units of shares or stocks which the share holders subscribe to and pay for. The share holder’s personal liability towards business obligation is limited to the value of the shares subscribed to. Shares in a C Corp are generally freely transferable unless otherwise stipulated in its articles of incorporation or bylaws. There are no restrictions in the share ownership of a C Corp as in an S Corp. American citizens, resident or non-resident aliens or other entities can buy shares in a C Corp. Due to these reasons private investors readily invest in C Corps.
Liquidity and capital are imperative to the growth of businesses. The unrestricted transfer of ownership and shares in a C Corp acts as a motivation to private investors and financial institutions to invest in C Corps. Due to this fact it is easy to attract capital and operational funds required for the growth of business. Another advantage to investors is that their personal liability is limited to their investment. The share holders are not personally liable for any debts or claims arising out the C Corp business. All they stand to lose is the money they invested in the shares.
Limited Liability Company also provides the limited personal liability protection to its members. However, transfer of ownership in an LLC is not usually as free as in a C corporation. The formation formalities in LLC are also comparable to C Corporation. To form LLC, Corporation or an S Corporation, the rules and regulations of the domicile state has to be complied with. Periodical returns and reports are also required to be filed with the IRS and state governments by LLCs and Corporations. Some states require yearly franchise tax to be paid for renewing business permits and registrations of these business entities.