A C Corporation (C Corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. The “C” in C Corporation refers to the fact that the business is taxed under Subchapter C of the Internal Revenue Code in the United States. Here are the key characteristics and features of a C Corporation:

1. Legal Entity

• A C Corporation is a separate legal entity from its owners. This means that the corporation itself can own assets, enter into contracts, sue, and be sued, independently of its shareholders.

2. Limited Liability

• Shareholders of a C Corporation enjoy limited liability, meaning they are not personally liable for the debts and liabilities of the corporation. Their financial risk is limited to the amount they have invested in the company.

3. Taxation

• C Corporations are subject to double taxation. First, the corporation pays taxes on its profits at the corporate tax rate. Then, when dividends are distributed to shareholders, those dividends are taxed again at the individual level.
• The corporate tax rate is determined by federal tax laws, and some states may also impose additional taxes on C Corporations.

4. Unlimited Growth Potential

• C Corporations can have an unlimited number of shareholders, and they can issue multiple classes of stock. This makes it easier to raise capital from investors.
• They can also attract more sophisticated investors, such as venture capitalists, due to the structure’s potential for growth and scalability.

5. Perpetual Existence

• The life of a C Corporation is perpetual, meaning it continues to exist even if the owners or shareholders change or pass away. This provides stability and continuity for the business.

6. Compliance Requirements

• C Corporations must adhere to more regulatory requirements and formalities compared to other business structures, such as holding regular board meetings, maintaining detailed records, and filing annual reports with the state.

7. Ability to Go Public

• C Corporations can become publicly traded by listing their shares on a stock exchange, which allows them to raise significant amounts of capital and provides liquidity to shareholders.

8. Eligibility for Tax Deductions

• C Corporations can deduct certain business expenses, such as salaries, benefits, and operating costs, which can reduce taxable income.

C Corporations are often chosen by larger businesses or companies planning to go public, primarily due to their ability to raise capital, offer stock options, and provide limited liability protection. However, the complexity and cost of maintaining a C Corporation can be higher than other business structures like S Corporations or LLCs.