What is a C Corp?

What is a C Corp, and how does it differ from other types of corporate structures?

A C corporation (C corp) is a legal business entity that is taxed separately from its owners or shareholders. Often referred to as a “general for profit” corporation, C corps are the most common type of corporations, and they often have many shareholders. C corps are subject to both personal and corporate tax, and thus they are technically double-taxed, with corporate taxes paid on earnings before distributions are made to shareholders (called dividends). The shareholders then pay personal income tax on these earnings. While this double taxation is less desirable for many smaller entities, larger companies choose this structure because they can reinvest profits in the company at a lower corporate tax rate. C corps must hold a shareholder and director meeting each year, complete with recorded minutes and voting records. Regulations and recordkeeping are more stringent for C corps, so it’s a good idea to study this structure carefully and employ the help of a good accountant and lawyer before selecting this option.

 

NEXTSTEPS | 1.16.21

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