The general corporation, also known as a stock, open or C corporation, is one of the most common types of corporations formed in the state of Delaware. Many people enjoy its structure, ability to raise capital and more, but is it right for your business? Learn more about the benefits of a Delaware corporation below.
General corporations may raise capital by selling shares of stock in the company, either by going public or by a private offering of stock. Typically, this money can then be used at the company's discretion to launch a new product, grow in size or a variety of other options. However, it's important to note that general corporations are not required to issue stock. General corporations are also typically utilized by companies that wish to attract venture capital financing.
The structure of the Delaware general corporation has a clear separation of rights and responsibilities. Shareholders own the company via shares of stock, officers handle the company's day-to-day business, and Directors run the company. Stockholders elect Directors, who then select officers and hire key management as well as decide whether the company will declare a dividend. For more on this entity's structure, please visit our general corporation page.
There is no size limit for general corporations, and they have the ability to grow. The formal corporate structure typically becomes an asset as the company increases in size and is responsible for more employees.
Unlike limited liability companies, ownership in a general corporation is easily transferred via shares of stock. These shares can be sold to potential stockholders via public or private offering.
One of the disadvantages of a general corporation is that it can be taxed twice—once at the corporate level and again at the shareholder level if a dividend is declared. However, general corporations possess the ability to file to become a subchapter S corporation within 75 days of the company formation date. Once the IRS approves the application, the company typically does not have to pay federal income taxes. Instead, the tax liability will be passed through to individual shareholders. Please visit our subchapter S corporation page for details.
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