C Corporations
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VPersonalized Corporate Minutes |
A C Corporation is a completely separate tax and legal entity from its owners, and owners who work in the business are treated and taxed as employees of the corporation (Note: The "C" in C Corporation refers to a subchapter of the tax code; C-Corporations are one of the most common firms of corporations, and they are frequently referred to generically as corporations).
C Corporations are subject to corporate income taxes separate from the owners, where most other forms of business entity allow for the company profits to "pass-through" to the personal income tax statements of the owners. As such, C Corporations are the most formal business entity and they have greater tax reporting responsibilities than other business entities. C Corporations allow for profits to be retained in the business, if desired, and frequently these profits can be taxed at a lower rate than personal income. C Corporations can also pay out after tax profits to its owners in the form of dividends, but this can also lead to double taxation.
C-Corporation Advantages
A C Corporation is a completely separate tax and legal entity from its owners, and owners who work in the business are treated and taxed as employees of the corporation (Note: The "C" in C Corporation refers to a subchapter of the tax code; C-Corporations are one of the most common firms of corporations, and they are frequently referred to generically as corporations).
C Corporations are subject to corporate income taxes separate from the owners, where most other forms of business entity allow for the company profits to "pass-through" to the personal income tax statements of the owners. As such, C Corporations are the most formal business entity and they have greater tax reporting responsibilities than other business entities. C Corporations allow for profits to be retained in the business, if desired, and frequently these profits can be taxed at a lower rate than personal income. C Corporations can also pay out after tax profits to its owners in the form of dividends, but this can also lead to double taxation.
Limited Personal Liability
C-Corporation Disadvantages
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Entity Comparison Chart |
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| C Corporation | S Corporation | LLC | |
| Owners have limited liability for business debts and obligations | |
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| Created by a state-level registration that usually protects the company name | |
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| Business duration can be perpetual | |
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| May have an unlimited number of owners | |
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| Owners need not be U.S. citizens or permanent residents | |
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| May be owned by another business, rather than individuals | |
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| May issue shares of stock to attract investors | |
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| Owners can report business profit and loss on their personal tax returns | |
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| Permitted to distribute special allocations, under certain guidelines | |
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| Not required to hold annual meetings or record meeting minutes | |
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| Owners have NO personal liability for business obligations | |
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| Number of owners allowed | 1 to unlimited | 1 to 100 | 1 to unlimited |
| Management decisions made by... | Board of Directors | Board of Directors | Members |
| Raising Capital | Sale of stock & other permitted instruments | Sale of stock & other permitted instruments | From the members |
| Income Taxes | Paid by the corporation | Passed through & paid by the shareholders | Paid by members unless elect corporate tax status |
| Who Deducts Losses | Corporation | Passed through to the shareholders | Special rules apply - check with tax advisor |
| Taxation | Double; both the corporation and shareholders are taxed | Taxed Once | Taxed Once |
| Transfer of ownership | By stock transfer | By stock transfer | Most LLC Agreements require approval of members |
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