Question

If you were in the process of starting a new business why would you elect a "C" corporation over a 501C3 entity?

Answer 1

A 501C3 entity is formed for charitable, educational, religious, literary or scientific purposes and not for the purpose of generating profits for its shareholders. Although it is exempt from paying taxes but it is also prohibited from paying dividends to its members. To establish and maintain tax-exempt level it has to obey complex tax filing requirements at both the State and Federal level. On the other hand, a C corporation does not have the above shortcomings. It is formed for generating profits for its shareholders. It can pay dividend to its shareholders. It does not have to obey complex tax filing requirements like a 501C3 entity. For these reasons I would elect a C corporation over a 501C3 entity for my new business.