When you’re creating a business, you have many formation choices. You can remain a sole proprietor, if your operation is small, or you can fully incorporate your business.

How do you decide?

Speaking with a professional advisor is a must because they can tell you all the pros and cons of each formation type, but it does help to have an idea of your options before you step into the office to discuss your ideas.

Here are four signs that your company should consider forming a C corporation.

You Don’t Want to Be Personally Responsible for Your Business

This is something many entrepreneurs don’t think about, especially if they just fell into their business. After all, you probably aren’t thinking about being sued or being raked over the coals at tax time for the little operation you run out of your garage.

Unfortunately, both these things can happen, no matter how big or small your business. It is important to safeguard your personal financial liability. A C corporation is one way to do that.

Because your business is listed as a separate entity, your personal finances are protected should the unthinkable happen.

You will still be required to be responsible in the sense of advancing your business. This doesn’t mean a fully hands off approach of course, it just means from a personal point of view. You can still avoid the nasty side of business if you actually take into account what you need and how you do it.

For example, businesses nowadays can’t run on old practices anymore, there has to be a lot more technology integration to deflect issues and keep staff as well as customers happy. From implementing an inventory management system to support accuracy and efficiency all the way to instilling health and safety protocols that are made well aware by everyone.

You want to avoid being sued and dealing with devastating issues? Don’t wash your hands off your business once it gets going, lean into it and do what you can to make it a powerhouse in your industry.

You Don’t Necessarily Want Shareholders to Make All the Decisions

Things can get complicated when you have outside investors giving you money to grow your business. How much stake in the company should they have?

If you want to retain your creative freedom to make choices with your team, you might want to consider a C corporation. Shareholders may own the business, but the day-to-day operations are left to the CEO and other important players you work with on a daily basis.

You Want the Business to Appear Professional

You have to think about how your business looks to customers and clients. To make sure your business looks professional, you can do things like:

  • Obtain an official business address
  • User larger invoice numbers
  • Design a professional website

Forming a business entity is another way you can appear more professional. Although nearly any entity will do, a C corporation will make your business seem larger and more professional than it might be in reality.

You Want to Rapidly Expand Your Business in the Future

If your business has ambitious plans for rapid expansion in the future, establishing a C corporation is a wise move.

C corporations have the advantage of being able to issue stock, enabling them to secure funding and facilitate Mergers and Acquisitions. Furthermore, C corporations are distinct entities from their shareholders, which means that shareholders aren’t personally responsible for the company’s debts and legal obligations.

This setup offers enhanced protection and flexibility for businesses with ambitious growth goals.

When deciding, it pays to seek professional help. An advisor who knows about all the pros and cons of each type of formation will be able to help you decide if a C corporation is right for your business.