The US C-Corporation: Where the Name Comes From, How to Open One, What It Costs, and Why Foreign Owners Prefer It

If you intend to raise money from angels or venture capital, or to employ people in the United States, this is the structure you will end up with — and the friendliest of the US forms for a foreign owner, because the company is a genuinely separate person that deals with banks, the tax authority and the courts in its own name. WHAT IT IS A corporation is a separate legal person. It can own property, contract, employ, borrow, sue and be sued, and it outlives its owners. Shareholders elect a board of directors; the board appoints officers. Shareholders risk only the capital they paid for their shares. "C-corporation" describes the tax regime, not the legal shape: a corporation is a C corporation unless it elects S status. WHERE THE NAME COMES FROM "Corporation" is from the Latin corpus, "body", through corporare, "to form into one body", and the late Latin corporatio. A corporation is an artificial body — a person made by law, not born. Medieval guilds, chartered towns and trading companies such as the East India Company were bodies corporate, created by charter and separate from the people who composed them. The "C" is not an acronym: it comes from Subchapter C of Chapter 1 of the Internal Revenue Code, which holds the default rules for taxing a corporation and its shareholders. In 1958 Congress added a lighter regime for small businesses and filed it in Subchapter S, so the default became known as the C corporation. There is no C election to make — it is what you get if you elect nothing. "Incorporated" means liability limited to the investment; "Delaware corporation" means incorporated under Delaware law, where about two thirds of the Fortune 500 are registered because the Court of Chancery has handled corporate disputes since 1792 and the statutes are updated yearly to match what investors' counsel expects. HOW TO OPEN ONE 1. Choose the state — Delaware is the convention for anything venture-backed, even if you operate elsewhere; you then register as a foreign corporation where you actually work. 2. Check the name and add a corporate suffix (Inc., Corp., Corporation). 3. Appoint a registered agent with a street address — USD 50-300 a year. 4. File the certificate of incorporation. Delaware's fee starts at USD 109 and rises with authorised shares and par value; same-day service costs about 100 more. 5. Hold the organisational meeting: bylaws, directors, officers, bank authority, fiscal year. 6. Issue founders' shares. If they vest, each founder must file an 83(b) election within 30 days — there is no extension. 7. Get an EIN free on Form SS-4, adopt an equity plan if you will hire, register for state taxes and payroll. 8. File Form 2553 if the corporation wants S status instead. HOW TO RUN IT - Form 1120 by the 15th day of the fourth month after year end (15 April for a calendar year). - 21% federal corporate tax plus state tax, and any state minimum franchise tax. - Dividends are taxed again in the shareholder's hands — the double taxation the form is known for. A company that reinvests its profit does not trigger it. - Formalities: board and shareholder minutes or written consents, a share register, an annual meeting. - Delaware franchise tax due 1 March — roughly USD 175 minimum under the authorised shares method, about 400 under the assumed par value capital method — plus a USD 50 annual report fee. - Pay owner-employees through payroll: quarterly Forms 941, annual W-2s, state unemployment insurance. WHAT IT COSTS Formation: state fee USD 109 minimum in Delaware, 100-500 elsewhere; registered agent 50-300 a year; a formation service 200-500; founders' documents and share issuance 0 with templates, 1,500-5,000 with a lawyer — use a lawyer if you are raising money. EIN free. Annual: Delaware franchise tax and annual report from roughly 225 upwards, more for a large authorised share count; registered agent 50-300; accounting and tax returns 1,000-5,000; payroll processing 40-100 a month per employee. A priced financing round later costs 15,000-50,000 in legal fees. IF YOU ARE NOT A US PERSON Shareholders can be non-residents. A Delaware C corporation may be owned entirely by non-US persons and foreign companies. There is no residency test, no nationality requirement and no shareholder cap. You do not have to be a director, officer or employee to own it. Banking is easier than for an LLC. The corporation is a separate US person with its own EIN, so banks and payment processors assess the company rather than you personally. Dividends are withheld at 30% unless a tax treaty reduces it — commonly 5% for a qualifying foreign corporate parent, 10% or 15% for individuals. The shareholder files Form W-8BEN or W-8BEN-E so the company withholds at the treaty rate; skipping the form costs the difference between 15% and 30% on every distribution. No US taxpayer number is needed to be a shareholder or director: the company needs its EIN, the shareholder needs a W-8. Under FinCEN's final rule of August 2026, US-formed corporations are permanently exempt from beneficial ownership information reporting, whoever owns them. Expect a US return regardless of activity: Form 1120 every year, plus reporting on distributions to foreign shareholders and transfer-pricing documentation if the company transacts with related foreign parties. Owning shares is not a work permit. Holding shares, or attending a board meeting from abroad, is not "working" in the United States; running the business from inside the country is. That path is a visa — E-2 for treaty nationals (and not every nationality has a treaty), L-1 for intra-company transfers, O-1 for extraordinary ability. Your home country will have its own view: controlled foreign corporation rules taxing the profit as it arises, how distributions are characterised, whether US withholding is creditable, and whether transfer pricing applies to what you charge your own company. THE SHORT VERSION The standard vehicle for raising money, hiring in the US, granting options and reinvesting profit: 21% federal tax plus state tax, dividends withheld at 30% cut to a treaty rate by filing a W-8 form, more paperwork and accounting than an LLC — and the easiest US structure for a foreign owner to open and bank. General information, not legal or tax advice. Tax rates, fees and immigration rules change; confirm current figures with the state, the IRS and an adviser before acting.