C-corporation is the standard type of corporation—in other words, it’s an independent legal entity that exists separately from the business owners.

This being said, to better understand what C-corps entail, we can break down their characteristics into four main categories: management structure, liability protection, tax treatment, and regulations.

Management structure: First, C-corps have a tri-level management structure:

  • Shareholders who hold stock in the company own the business.
  • The shareholders elect a board of directors to make decisions on major company issues.
  • And on a daily basis, board-appointed officers—such as the chief executive officer and chief technology officer—run the business.

Liability protection: With this in mind, because C-corps are separate entities from their owners, shareholders enjoy limited liability protection under the law. Therefore, creditors and anyone who sues your business can only lay claim to the company’s assets. Of course, if you’ve personally guaranteed a business loan, then your personal assets are on the line.

Taxation: Next, in terms of taxation, C-corps are the only type of business that must pay a company-level income tax. This is in contrast to an S-corp, which is a pass-through entity that lets shareholders report profits and losses on their personal tax return.

After the passage of the Tax Cuts and Jobs Act—more popularly known at the Trump Tax Plan—the C-corp tax rate is a flat 21%. Shareholders also have to pay personal taxes on corporate dividends. Many people refer to this as double taxation. Despite the disadvantage of double taxation, corporations can take some unique tax deductions that aren’t available to other types of companies.

Regulations: Finally, when it comes to regulations, C-corps have many more formalities to adhere to in comparison to other business entity types. On top of formally registering with the state, C-corporations must observe corporate protocols, such as adopting bylaws, filing an annual report, and holding director and shareholder meetings.

Additionally, one of the most beneficial formalities associated with C-corps is that they can issue stock to shareholders to raise capital. Plus, unlike S-corporations, which come with several limitations on stock issuance, C-corps have virtually free reign over their stocks.

There’s no limit on the number of shares that a C-corp can issue, and a C-corp can have multiple classes of stock. Shareholders can be citizens, residents, non-resident aliens, or other companies.

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