How to form a C-corporation for Distribution

Introduction

If you’re distributing products on behalf of a company, you may want to consider forming a C corporation. A C corporation is formed by filing articles of incorporation with the state and holding a board of directors meeting. Once this is done, you must issue shares of stock to owners, adopt bylaws and file IRS Form 2553 to make an election for S-corporation status. If that doesn’t work out in your favor, you can also choose C-corporation status by filing IRS Form 8832 instead.

File the form with your state

This process is different depending on where you live and what kind of business you have, but it typically involves paying a fee and waiting for some time before the information is processed.

Hold a board meeting and keep the minutes

Board meetings are an effective way to keep the company organized and running smoothly. The board of directors should gather at least once per month to review the financials, discuss any problems or opportunities with the business, and give advice on how to handle them.

The minutes of each meeting should be recorded in a special notebook or binder. The notebook should contain enough pages so that you can record all important decisions made by the board during your first year as a corporation. Keep this record up-to-date at all times!

Adopt bylaws

These are the internal rules of a corporation. Bylaws are not required by the state, but they’re highly recommended because they ensure that your business is run in an organized and orderly manner. You might be tempted to skip this step because it’s not mandatory, but you should make sure your bylaws are as specific as possible so they can be used later if there’s ever any dispute over how decisions were made or what was agreed upon. If there’s anything important that needs to be included in these documents.

Issue shares of stock

When your company is issuing ownership interests in itself—essentially creating something akin to an investment vehicle for potential investors. It’s important that you register with the state before issuing any shares; if your corporation doesn’t have a paid-in capital (PIC) of at least $25 million or 10% of gross receipts from the previous year, then it will probably be required by law to register as an S-corporation instead. The number of shares issued will depend on how much money each investor is willing to commit, but generally speaking most corporations issue equity worth around 20% of their total assets—meaning if your company has $1 million in assets, then each shareholder would receive 1/5th ownership interest in exchange for their investment money: $200k worth.

File IRS form 8832 to make an election for C-corporation status

The first step in forming a C-corporation is to file IRS form 8832, which authorizes you to elect C-corporation status and allows your company to file taxes under Subchapter C of the Internal Revenue Code. This form will also allow you to choose S-Corporation tax status, if that’s what makes sense for your business.

You’ll need access to an accountant who can help you determine which type of corporation is best for your circumstances. In general, however, there are two main considerations: whether or not you have investors, and how many employees the company has. If neither applies—that is, if you’re starting a one-person business with no outside funding—then it’s generally recommended that you go with an S-Corp instead of a C-Corp because it gives owners more flexibility and avoids some of the additional costs associated with being incorporated as a C-Corp (like paying state fees).

You can choose C or S status depending on your circumstances

In the U.S., a corporation is limited to one of two types: a C-corporation or an S-corporation.

C corporations are good for businesses that want to raise capital and have more than 50 shareholders because they’re taxed at the corporate level, then again at the shareholder level when dividends are paid out. They also tend to be larger and more complex than their smaller counterparts, which makes them easier targets for federal and state taxes if you don’t pay close attention to accounting rules.

S corporations should be chosen by small businesses with fewer shareholders (less than 100) because they’re taxed at only one level—at the business level—and offer some tax benefits over C corporations, like no double taxation on corporate earnings or payroll taxes like social security or Medicare on your employees’ wages

Conclusion

I hope this article has helped you understand how to form a C-corporation for distribution. If you have any questions, feel free to contact Trademark Avenue our people are ready to help you and make you feel reach us out!