Corporation

A Little About the

C-Corporation

C Corporations represent the traditional corporation and original tax structure. “Subchapter C” is a reference to the tax code sections applicable to corporations that do not file a Subchapter S election. C Corporations are subject to tax rates at the entity level different from the individual level. Individual shareholders are taxed only when they receive dividends or distributions from the entity. C Corporations are taxed at both the entity level and the dividend level (this is commonly referred to as the “double taxation” effect inherent in C Corporations). C Corporations are the most common form of larger publicly-held corporations and are useful when earnings are expected to be retained and re-invested by the corporate entity.

  • All C Corporations provide limited liability protection to their owners/shareholders. Shareholder liability is limited to their investment in the entity. C Corporation liabilities are limited to the assets and resources of the entity. (LLC’s, S Corporations and limited partnerships provide similar protection. Proprietorships and general partnerships do not.)
  • C Corporations are owned by shareholders and managed by a board of directors and officers. LLC’s offer more flexibility in these areas than corporations and partnerships.
  • Shareholders may number 1, 2 or more and there is no maximum limit. Shareholders may include individuals, LLC’s, partnerships, corporations, trusts, etc., any or all of which may include resident or foreign individuals or entities. (LLC’s, C Corporations and partnerships offer more flexibility. Proprietorships and S Corporations do not.)
  • Shareholder interests are not restricted to one class and may include different classes, voting rights, capital or profits interests, etc. (C Corporations and partnerships offer more flexibility. Proprietorships and S Corporations do not.)
  • C Corporations are managed by a board of directors and officers. Directors and officers (including shareholders acting as directors or officers) are protected by the “business judgment rule” for decisions made in good faith, but may be individually liable for gross negligence or willful misconduct in their actions as directions or officers. (C Corporations may consider the procurement of directors and officers insurance coverage in order to provide additional protection to directors and officers against individual liabilities.)
  • C Corporations are subject to tax rates at the entity level different from the individual level. Individual shareholders are taxed only when they receive dividends or distributions from the entity. C Corporations are taxed at both the entity level and the dividend level (this is commonly referred to as the “double taxation” effect inherent in C Corporations). Revenues and expenses are reported and taxed at the entity level by the entity through Form 1120 and dividends or distributions, if any, are reported by Form 1099’s and taxed at the member level on Form 1040, Schedule B.
  • For any entity offering an investment opportunity to more than 1 investor, federal and/or state securities laws may apply and may require certain disclosures or registrations in connection with such an offering. Please consult a licensed attorney for advice concerning your specific circumstances.