Could Changing Your Business to C Corp Status Save You Money?

Businesses can be structured in a number of different ways — from sole proprietorships and partnerships, to limited liability companies (LLCs) and corporations. Beyond that, there are multiple different types of corporate structure business owners can choose, with one of the most prevalent being the C corporation (C corp).

In this article, our Illinois business law firm explains how changing your company to C Corp status could potentially save you money. If you have any specific questions or concerns about business formation or C corp status in general, you should contact an experienced Chicago business lawyer for guidance.

C Corp Status Offers Potential Tax Advantages

A C corporation is named as such because it is subject to taxes under subchapter C of the Internal Revenue Code (IRC). Among other things, this means the corporation’s profits are taxed separately from the individual owners of the company. Nonetheless, C corp status may be able to offer some business owners significant tax advantages — this is especially true in light of the Tax Cuts and Jobs Act of 2017, which cut tax rates for C corporations down to 21 percent.

To be clear, a C corp will not offer tax advantages for all business owners. In fact, it could result in higher taxes in some cases because of the issue of double taxation. As a general rule, if business owners are not planning on taking distributions from the company in the near future, a C corp will offer a lower tax rate than will a pass-through entity. However, if you are planning on taking distributions, then the tax liability associated with C corp status may be higher.

C Corps are Flexible Businesses

Another important advantage of forming a C corporation is it is a fundamentally flexible business structure. Indeed, it is typically easier for business owners to raise capital through a C corp because the company can issue several different classes of stock, can have an unlimited number of shareholders and can offer investors full liability protection. For Cook County, Illinois business owners who are thinking about selling their company in the future, changing to C corp status could be the right decision.

You Should Consult With a Business Lawyer Before Changing 

Before making any major changes to the structure of your business, it is highly recommended you speak to an experienced Chicago business law attorney. Your attorney will review the specific nature of your business and your objectives. With complete information, your lawyer can explain, in detail, all the benefits and drawbacks of changing your company to a C corp, or any other type of business form.

Contact Our Chicago Business Law Attorneys Today

At North Suburban Legal Services LLC, our Chicago business lawyers offer professional, actionable legal guidance to companies throughout the region. If you have questions about changing your business to a C corp, we are here to help. To arrange a fully private initial legal consultation, please

contact our law firm today by calling (312) 909-6089.

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