C Corporations

A C Corp is a separate legal entity that pays its own taxes, has full liability protection and can have an unlimited number of shareholders, residing anywhere is the world.

A Corporation is an independent legal entity that is separate from the people who own, control and manage it. Due to this recognition as an individual entity, it is viewed as a legal “person” in the view of federal and state tax laws, and can thus be engaged in business and contracts, can initiate lawsuits and itself be sued. It also must pay taxes.

Corporations pay federal, state and (if applicable) local taxes. The owners, shareholders can only be paid out of the corporation in two ways: salary or dividend. This creates what is commonly known double-taxation, when the corporation itself pays federal and state taxes as well as all individual shareholders on their individual tax returns.

C Corps are the standard for business entities.  They can have unlimited amount of shareholders, who can reside anywhere in the world. C Corps are the most widely recognized business structure in the world, and generally is the only business type that can go public, offer shares to the general public.

C Corps currently are subject to lower tax rates than some individuals.  Their profits are kept inside the corporation, so shareholders are not forced to take the income personally, unless the corporation distributes the profits via salaries or dividends.  This is an advantage to those who want their business to grow without reporting personal income increases

Losses can be beneficial as well.  Unlike S Corps or LLCs, the losses from C Corps are held on to by the C Corp and can be carried forward for up to 20 years and carried back (via amended tax returns) to the previous 2 years.  S Corp shareholders and LLC members must take any losses annually on their personal returns via Schedule K-1.

C Corps are separate legal entities. This protects you and your personal assets. The C Corp is solely liable for its debts and obligations; the shareholder of the C Corp is not. If the C Corp were to be sued by a creditor, that creditor could only go after the C Corp’s assets and not the owner’s.

NOTE: The information contained here is for general purposes to help you understand the basics. It’s not intended as tax or legal advice. Feel free to consult your own CPA or attorney to discuss your specific business questions.

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