C Corporation - Brown Law PLLC

ALL 0-9 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A C Corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. This structure allows for the corporation to be treated as a distinct legal entity from its owners. C Corporations are subject to corporate income tax, which is levied on the corporation’s profits. When dividends are distributed to shareholders, those dividends are also taxed on the individual level, leading to what is known as "double taxation."

C Corporations provide several advantages, including limited liability protection for shareholders, which means their personal assets are protected from business debts and liabilities. This structure also allows for an unlimited number of shareholders, making it easier to raise capital through the sale of stock. Furthermore, C Corporations can establish various classes of stock, granting different voting rights or dividend preferences to different types of shareholders.

An example of a C Corporation would be a large tech company, such as Apple Inc. As a C Corporation, Apple pays corporate taxes on its earnings, and when it distributes dividends to its shareholders, those dividends are taxed again on the shareholders’ individual tax returns. This structure contrasts with other business entities, such as S Corporations or limited liability companies (LLCs), which may offer pass-through taxation, thereby avoiding double taxation on profits.

Glossary: C Corporation
A C Corporation is a legal entity taxed separately from its owners.

Alternative Meanings:

C Corporation
C Corporation

A C Corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. This type of corporation is recognized as a distinct legal entity, meaning it can enter contracts, incur debts, and be liable for its own actions, independent of its owners.

C Corporations are subject to corporate income tax on their profits, and then shareholders are taxed again on dividends they receive, creating what is commonly referred to as "double taxation." This is a significant feature that distinguishes C Corporations from S Corporations, which are typically pass-through entities for tax purposes.

C Corporations can have an unlimited number of shareholders, making them an attractive option for businesses seeking to raise capital through the sale of stock. They can also issue multiple classes of stock, which provides flexibility in ownership and investment strategies.

For example, a tech startup may choose to form a C Corporation to attract venture capital. By doing so, it can issue preferred stock to investors, allowing them to have certain benefits, such as priority on dividends or liquidation preference. This structure may also offer the startup the advantage of going public in the future through an Initial Public Offering (IPO), further enhancing its ability to raise funds.

In summary, a C Corporation is a structured business entity that offers liability protection to its owners, flexibility in ownership, and access to a broader range of capital-raising options, albeit with the potential drawback of double taxation.

« Back to Glossary Index