C corporation

Definition

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 business structure provides limited liability protection and allows for unlimited growth potential through stock sales.

5 Must Know Facts For Your Next Test

1. C corporations are subject to corporate income tax on their profits.
2. Shareholders of C corporations face double taxation: first at the corporate level and then again on dividends received.
3. C corporations have no limit on the number of shareholders they can have.
4. This structure offers limited liability protection to its shareholders.
5. C corporations can issue multiple classes of stock.

Review Questions

• What are the tax implications for a C corporation and its shareholders?
• How many shareholders can a C corporation have?
• What type of liability protection does a C corporation offer?

Related terms

S Corporation:

A type of corporation that meets specific Internal Revenue Code requirements and passes income directly to shareholders, avoiding double taxation.

Limited Liability Company (LLC): A flexible form of enterprise that blends elements of partnership and corporate structures, offering limited liability to its members.

Corporate Governance:

The system by which companies are directed and controlled, involving regulatory requirements and practices affecting management decisions.