Questions for C-Corp startup

[RamanSidhu]

Hello,
I'm a new startup with a e-commerce and i have a couple quick questions that some of you might be a help with:

-If I was to start a c-corp would i be paying any taxes if i wasn't making any profits?
-Does anybody have a rough number for the fees in terms of registering a C-corp in CA?
-Any information on terms of me getting a lawyer with the process of registrations with a lawyer. Such as fees and such.

Thank You in advance. And excuse me if i posted any repeat questions.

[GlobalWealth]

I would seriously advise against a c-corp structure. Generally this only becomes advantageous once you reach a couple of million dollars in net profit. It creates unnecessary complications and is a bit more costly to maintain. Is there a particular reason you think a c-corp is better? You wouldn't pay taxes with any structure if you aren't earning any profit, c-corp, s-corp, or LLC. There are better alternatives for an ecommerce business structure. Let me know if you need assistance on setting up an entity for your business.

[RamanSidhu]

We are working on a rather big e-commerce project. A project that we believe can revolutionize and can hit as the next big thing in internet business. The main reason we aimed for a c-corp is so we could spread our company by shares to initial investors and "one day" have the opportunity of going public. At first we had the interest of an LLC and after doing some research moved over to the decision of a C-Corp.

[GlobalWealth]

If you see huge potential, then a c-corp would be the best route. It is the easiest for investors to cope with tax wise and most attractive for investors. C-corps are a little bit more complicated for annual reporting than a C-corp. Almost all public companies are DE registered companies, but would still need to be registered in all states where there is nexus. You can count on $2-3k for c-corp set up for one state and about $1k renewals.

[mjr]

-If I was to start a c-corp would i be paying any taxes if i wasn't making any profits?

This varies state to state. Theoretically, no profit = no tax, but you would have to read up as some states have a minimum corp. tax that must be paid in lieu of profits.

-Does anybody have a rough number for the fees in terms of registering a C-corp in CA?

Shouldn't be hard to find, check with the state corporation commission. This shouldn't cost you more than a few hundred dollars.

-Any information on terms of me getting a lawyer with the process of registrations with a lawyer. Such as fees and such.

As a rule of thumb a lawyer will run you 10x what it would cost to do the registration yourself. Don't shy away, this is not the place to cut corners if you plan to be a serious business. Shop around, get a few quotes, and always when dealing with lawyers, remember they work for you. Be assertive, go to them with a clear idea of what it is you want accomplished.

[RamanSidhu]

Thank You fir all the help. I did lots of research over these past days and weeks and found lots of information i needed.

[rdc]

While there is no hard and fast rule, it is often more common to begin with an S-Corp and convert to a C-Corp upon financing.

In addition to the greatly simplified tax/accounting, operating a C-Corp means that loss carryback/carryforward occurs only at the corporate level. In other words, if you as an individual shareholder experience loss (which is likely for any business, at least within the first year), you cannot write it off of your personal taxes. This can be disastrous.

If you insist upon doing this, you should at a minimum become familiar with what is called Section 1244 (Small Business) Stock, and find an attorney to structure your C-Corp in order to take advantage of this exception to the general rule (allowing $50,000 of loss deduction personally to shareholders ($100k if filing jointly)).

Don't cut corners now, or you will pay (probably double) for it later.

[GlobalWealth]

Don't cut corners now, or you will pay (probably double) for it later.

This is worth reiterating. Many of my clients are entrepreneurs that went the DIY or cheap route up front, and now need to clean up their mess. It is much more expensive to clean up a mess than get it straight from the beginning.