One essential decision you must make as a new business owner is the entity you choose to operate. Corporations have several benefits over limited liability companies and partnerships, but you want to make sure the benefits suit your needs. Do you wish to separate your assets from the business? Do you plan to raise capital by selling stock to enough shareholders that you can eventually file to become a public company?
Connecticut corporations are automatically set up as C-corporations, unless you elect a special Internal Revenue Service tax provision available to S-corporations. However, as an experienced attorney could explain, this subchapter is more restrictive. Contact a Connecticut C-corporations lawyer who can discuss whether this option is the right fit for your new business.
According to the Connecticut Business Corporations Act, Sec. 33-655, the business name must contain one of these words or abbreviations: corporation (corp.), incorporated (inc.), company (co.), Societa per Azioni (S.p.A.), or limited (ltd). A new owner cannot choose a name being used by any other Connecticut company, which the Secretary of State can verify. Corporations must name a registered agent to accept service of government and other crucial documents, such as lawsuits. A C-corporations attorney can assist new businesses in Connecticut with these required filings.
After choosing a business name, incorporators are required to submit articles of incorporation to the Connecticut Secretary of State, along with a filing fee. C-corporations must have at least one director and are permitted to conduct any legal business, although the company name cannot be misleading about the type of business it conducts.
Incorporators are creating a legal entity apart from its owners when filing to become a C-corporation. Like humans, C-corporations can earn money, sustain losses, sue and be sued, and pay taxes on profits, although profits can also be distributed as taxable dividends to the company’s stockholders. A knowledgeable lawyer at our firm can further explain these benefits of C-corporations.
The Connecticut Business Corporations Act sets forth the rules that govern business entities in the state. For instance, after incorporating, all corporations must adopt bylaws, which are the roadmap for managing the company and situations as they arise. Bylaws cannot contradict Connecticut law and are adopted at the organizational board of directors meeting.
Director and shareholder meetings, including such notices, and any actions authorized by board committees should be memorialized and kept in the records repository. Other official records that should be accessible by management and shareholders include shareholder and director resolutions, bylaw amendments, and the IRS letter designating the Employer Identification Number (EIN), used for banking and remitting tax withholdings.
Additional C-corporation actions include the following:
The Connecticut attorneys at Sparks Law are experienced in setting up and maintaining records, filing requirements, stock disbursement, raising capital through equity and debt, and maintaining C-corporations over the long term.
C-corporations are permitted to offer several classes of stock, all of which can be advantageous when raising capital through equity. The number of shareholders is not limited as it is for S-corporations. Shareholders can lose their initial investment but do not lose personal assets if the company fails. Corporations can also retain profits to accrue capital.
As a new entrepreneur, you have many crucial decisions to make. One of the first is choosing the appropriate entity. The legal team at Sparks Law can help steer you toward the best structure depending on your vision for your company’s future.
A Connecticut C-corporations lawyer is ready to sit down with you and discuss the merits of the entity you choose. We are skilled at launching new companies and can answer your questions about the corporate structure. Call us today to get started.