C CORPORATION
Back to GlossaryDefinition
A type of legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity
Summary
A C Corporation is a type of business entity that is legally separate from its owners (shareholders). It's called a 'C Corp' because it's taxed under Subchapter C of the Internal Revenue Code. This structure provides limited liability protection to shareholders, meaning their personal assets are generally protected from business debts and lawsuits. C Corporations can have unlimited shareholders, issue different classes of stock, and exist perpetually. However, they face 'double taxation' - the corporation pays taxes on its profits, and shareholders pay taxes again on any dividends they receive.
Usage Context
Understanding C Corporations is crucial when studying business formation options, corporate taxation, business law, and investment structures. This knowledge is essential for entrepreneurs choosing business entities, investors evaluating companies, and anyone working in corporate finance or business management.
Common Confusions
- Thinking C Corporations and S Corporations have the same tax treatment
- Confusing shareholders with employees or managers
- Believing that incorporation automatically means C Corporation status
- Not understanding that the corporation is a separate legal entity
- Assuming all corporations face double taxation (S Corps don't)
