Alpharetta C Corporations Lawyer

If you elect to charter your Alpharetta business as a corporation, it is automatically considered a C Corporation if you do not choose to become an S Corporation. A Corporation can sue and be sued, accrue debt and profits, and shield its shareholders from corporate liability under Georgia law.

If you are ready to launch your corporation, talk to a skilled attorney about which designation best serves your interests. At Sparks Law, an Alpharetta C Corporations lawyer can walk you through your options and help you achieve your business goals.

Chartering a C Corporations in Alpharetta

Business owners file articles of incorporation with the Georgia Secretary of State along with a filing fee. The articles include important information about:

  • The business (name, address, purpose, etc.)
  • Initial directors and officers, if they are known
  • A registered agent, authorized by the company to accept important documents such as lawsuits

Shareholders in the corporation are not named, but their information should be included in the books and records kept at the company’s corporate office. Corporations can then apply to local regulatory agencies for any required licenses or permits.

Tax Differences for C and S Corporations

If owners elect to operate as an S Corporation instead, they agree to certain restrictions. The S Corporation is a federal tax designation that exempts the business from paying income tax because any profit passes through to shareholders, who claim their share on personal tax returns.

Conversely, C Corporations report profit and losses and pay corporate income taxes. Profits can be distributed to shareholders as taxable dividends as well. A local C Corporations attorney can further explain the tax implications for this designation.

Rules for C and S Corporations

C Corporations generally may have as many shareholders as are interested in purchasing the stock. This designation is preferential if a corporation plans to go public or raise working capital through equity. Any private placement memoranda issued by C Corporations must comply with Securities and Exchange Commission (SEC) rules, which an attorney at our Alpharetta office can explain in more detail.

On the other hand, S Corporations work well for close companies. This designation only allows for 75 shareholders who must be U.S. residents and pay Georgia income tax on pass-through profits, even if they do not live in Georgia.

Other differences between S and C Corporations include:

  • S Corporation shareholders can offset income by deducting their share of company losses on personal tax returns
  • C Corporations can offer different classes of stock; S corporations can offer only one
  • C Corporations can operate any legal business while S Corporations are restricted
  • C Corporations must use the accrual accounting method if gross receipts exceed $5,000,000, but S Corporations are only required if they carry inventory
  • C Corporations can retain profits to accumulate capital, while S Corporations pass it through to shareholders
  • C Corporations can choose a fiscal year-end while S Corporations must use December 31

Because taxation and profit allocation differ dramatically, it is essential for Alpharetta business owners to discuss the pros and cons of C Corporations with an attorney at our firm.

Converting C and S Corporations in Alpharetta

If they do not exceed the shareholder limit, business owners who initially file as a C Corporation can convert to an S Corporation by filing a Form 2553 with the IRS. Shareholders must also sign a Form 600 S-CA in which they acknowledge they will pay Georgia income tax on the profits passed through to them. The S Corporation also files a Form 600S with the state. A nearby attorney can advise on a conversion from a C to S Corporation.

If an S Corporation wishes to convert back to a C Corporation, it must apply to the IRS. Importantly, the converted C Corporation must retain the December 31 fiscal year-end, and it must wait five years to convert back to an S Corporation.

Call an Alpharetta C Corporations Lawyer for Legal Guidance

One of the most critical decisions you make about your company is its structure. If you have chosen to charter as a corporation, you need to know whether a C or S Corporation structure best meets your goals.

Work with an Alpharetta C Corporations Lawyer at Sparks Law. Our legal team will sit down with you and answer your questions about corporate entities, how they work, and which is best for your new business. Call us today to learn how we can help you achieve your goals.