Generally

The label, "C-Corporation" merely refers to a regular, state-formed corporation. To be formed, an Incorporator must file Articles of Incorporation and pay the requisite state fees and prepaid taxes with the appropriate state agency (usually, the Secretary of State).

Separate Legal and Tax Life

A corporation that is properly formed and operated as a corporation assumes a separate legal and tax life distinct from its shareholders. A corporation pays taxes at its own corporate income tax rates and files its own corporate tax forms each year (IRS Form 1120).

Management and Control in Corporation

Normally, a corporation's management and control are vested in the board of directors who are elected by the shareholders of the corporation. Directors generally make policy and major decisions regarding the corporation but do not individually represent the corporation in dealing with third persons. Rather, dealings with third persons are conducted through officers and employees of the corporation to whom authority is delegated by the directors of the corporation.

Shareholders

Shareholders are the owners of a corporation

Board of Directors

The Board of Directors is responsible for the Management and policy decisions of the corporation. There are, however, a few instances when the shareholders are required to approve of the Actions of the Board of Directors (e.g. amendment to the Articles of incorporation, sale of substantially all of the corporate assets, the merger or dissolution of the corporation, etc...).

Corporate Officers

Corporate officers are elected by the Board of Directors and are responsible for conducting the day-to-day operational activities of the corporation. Corporate officers usually consist of the following: (President, Vice-President, Secretary, Treasurer).

Number of Persons Required

In most states, one or more persons may form and operate a corporation. Some states, however, require that the number of persons required to manage a corporation be at least equal to the number of owners. For example, if there are two shareholders, there must also be a minimum of two directors.

Fringe Benefits

Corporations may often offer their employees unique fringe benefits. For example, owner-employees may often deduct health insurance premiums paid by the corporation from corporate income. In addition, Corporate-defined benefit plans often afford better retirement options and benefits than those offered by non-corporate plans

Corporate Formalities

To retain the corporate existence and thus the benefits of limited liability and special tax treatment, those who run the corporation must observe corporate formalities. Thus, even a one-person corporation must wear different hats depending on the occasion. For example, one person may be responsible for being the sole shareholder, Director, and Officer of the corporation; however, depending on the action taken, that person must observe certain formalities: Annual meetings must be held, corporate minutes of the meetings must be taken, Officers must be appointed, and shares must be issued to shareholders. Most importantly, however, the corporation should issue stock to its shareholders and keep adequate capitalization on hand to cover any "foreseeable" business debts.

Shareholder Liability for Corporate Debts

Where corporate formalities are not observed, shareholders may be held personally liable for corporate debts. thus, if a thinly capitalized corporation is created, funds are commingled with employees and officers, stock is never issued, meetings are never held, or other corporate formalities required by your state of incorporation are not followed, a court or the IRS may "pierce the corporate veil" and hold the shareholders personally liable for corporate debts.