C corporation what is

C corporations c corps offer unlimited growth potential through the sale of stocks, which means you can attract some very wealthy investors. Plus, there is no limit to the number of shareholders a c corp can have. Both c and s corps offer limited liability protection. Both require Articles of Incorporation to be filed. And both comprise shareholders, directors, and officers. There are lots of similarities, but they differ in the complex realm of taxation and corporate ownership.

As we mentioned above, c corps are subject to double taxation while s corps are pass-through tax entities, allowing them to avoid being taxed at the corporate level and again on shareholders' personal income taxes.

When it comes to corporate ownership, c corps have no restriction on ownership, which goes back to our point about them having unlimited growth potential. But s corps don't have that luxury as they're restricted to no more than shareholders. Also, s corps cannot be owned by a c corp, other s corps, LLCs, partnerships, or many trusts. But a c corp has no limits on who or what can be a shareholder.

Compare corporations and LLCs with our business comparison chart. You can prepare and file necessary paperwork yourself, or you can use incorporate. If you are unsure if incorporating will benefit your business, please call us.

Our Business Specialists are happy to answer your questions. State laws require all corporations to maintain a registered address with the Secretary of State in each state where they do business.

The person or company located at that address, known as the Registered Agent, must remain available during all business hours. A Registered Agent receives and forwards important legal documents and state correspondence on behalf of the business. Most states require c corps to file annual reports and pay franchise taxes to maintain their good standing. Failure to file annual reports and pay franchise taxes can result in fines, notices, and the inability to conduct business.

State laws require c corps to hold annual meetings of shareholders and directors and record meeting minutes. Owners and directors of a c corp use corporate minutes to reflect changes in management and important corporate activities.

A C corporation is the default structure of an incorporated company. Shareholders of C corps select the board of directors. Both limited liability companies LLCs and corporations have benefits and disadvantages. One benefit they both offer is limited liability; in both structures, the company becomes a separate legal entity from its owners.

Two of the main distinctions between LLCs and corporations involve management and taxation. LLCs have greater flexibility in their management structure, while corporations must follow a strict order of management with a board of directors handling management responsibilities. As noted before, corporations benefit from a wider range of tax deductions while also facing double taxation on shareholder dividends.

In contrast, LLCs benefit from pass-through taxation. This can be a good choice for a business that anticipates having outside investors or making its stock publicly available.

From a legal perspective, corporations have many precedents and case laws stemming from their existence throughout U. LLCs, on the other hand, are a relatively new business structure treated differently from state to state. Similar to LLCs, S corporations benefit from pass-through taxation.

As a result, S corporations typically work best for smaller companies. Other key differences include:. Shareholders cannot deduct any loss of the corporation. If you are a C corporation, use the information in the chart below to help you determine some of the forms you may be required to file. For more e-file information, see e-file for Business and Self-Employed Taxpayers. Instructions for Form PDF.

More In File. Corporations If you are a C corporation or an S corporation then you may be liable for Use Form Separate Instructions