Windows Forms: What's the right way to allow overlapping Controls?

I'm making a test program to see how well I can add events to a custom drawn System.Windows.Form.Control object. Should I do well with this, then I can make something more advanced for later.

The issue I'm having deals with the attached image. I have drawn two circles purposefully close to each other. The goal is to have one circle overlap another. For the purpose of this test program, I do not care which circle overlaps which. I do, however, care about the corners.

The image above shows that the center circle is buried by the left circle, but the left circle is also drawing the corners and covering the center circle with them. I'm hoping to hide those corners, or at least make them transparent. I did read that there is a way to make a control transparent, but using Color.Transparent on the BackColor was giving me black for some reason instead of matching up with the paint panel's color.

Below is the code part of the GUI (the designer is not included, but the key parts should be obvious).

namespace PaintingFirstAttempt
{
    using System;
    using System.Drawing;
    using System.Windows.Forms;

    public partial class Form1 : Form
    {
        public Form1()
        {
            InitializeComponent();
        }

        private void BtnExit_Click(object sender, EventArgs e)
        {
            this.Close();
        }

        private void BtnClear_Click(object sender, EventArgs e)
        {
            Graphics g1 = this.paintPanel.CreateGraphics();
            g1.Clear(this.paintPanel.BackColor);
            g1.Dispose();
        }

        private void PaintPanel_MouseDown(object sender, MouseEventArgs e)
        {
            this.paintPanel.Controls.Add(new EventableCircle {