C Corporation
A C Corporation is a completely separate tax and legal entity from its owners, and owners who work in the business are treated and taxed as employees of the corporation (Note: The "C" in C Corporation refers to a subchapter of the tax code; C-corporations are one of the most common forms of corporations, and they are frequently referred to generically as corporations).
C Corporations are subject to corporate income taxes separate from the owners, where most other forms of business entity allow for the company profits to "pass-through" to the personal income tax statements of the owners. As such, C Corporations are the most formal business entity and they have greater tax reporting responsibilities than other business entities. C Corporations allow for profits to be retained in the business, if desired, and frequently these profits can be taxed at a lower rate than personal income. C Corporations can also pay out after tax profits to its owners in the form of dividends, but this can also lead to double taxation.
C-Corporation Advantages
- Limited Personal Liability
- Perpetual Existence
- Better Fringe Benefits
- Advantageous Corporate Tax Treatment/Income Splitting
C-Corp Disadvantages
- More extensive record keeping requirements
- Dividend payments can lead to double taxation
