Characteristics:

  • Standard Corporation.
  • Offers limited liability protection, so shareholders (owners) are typically not personally responsible for business debts and liabilities.
  • Separate legal entity created by a state filing.
  • Formation documents (Articles of Incorporation or Certificate of Incorporation) must be filed with the state.
  • Structure includes shareholders, directors and officers.
  • Required to follow internal and external corporate formalities and obligations.
  • No restrictions on ownership.
  • Can have multiple classes of stock (disregarding voting rights)
  • Provide more flexibility when starting a business if you plan to grow, expand the ownership or sell your corporation.

Taxation:

  • C Corporations are separately taxable entities.
  • A corporate tax return (Form 1120) must be filed and taxes are paid at the corporate level.
  • Owners may be subject to the possibility of double taxation if corporate income is distributed to business owners as dividends, which are considered personal income.
  • Tax on corporate income is paid first at the corporate level and again at the individual level on dividends.
  • Personal Income Taxes are due on any salary drawn from the corporation and from any dividends received from the corporation.