Term: C Corporation
Type: Legal business structure
Also known as: C Corp
Common in: United States
Governed by: State corporate law and the Internal Revenue Code
Used by: Startups, large companies, and businesses seeking outside investment
Definition
A C Corporation is a legal structure for a business in which the owners, or shareholders, are taxed separately from the entity. C Corps are considered separate legal entities and offer strong liability protection, perpetual existence, and the ability to raise capital through the sale of stock. However, they are subject to double taxation — once at the corporate level and again on dividends paid to shareholders.
Key Features
- Separate Legal Entity: The corporation exists independently of its owners.
- Limited Liability Protection: Shareholders are not personally liable for corporate debts.
- Double Taxation: Profits are taxed at the corporate level, and again when distributed as dividends.
- Perpetual Existence: The business continues to exist even if owners change.
- Stock Issuance: Can issue multiple classes of stock to raise capital.
- Formal Requirements: Includes articles of incorporation, bylaws, annual meetings, and board of directors.
Common Use Cases
- Startups planning to seek venture capital
- Companies planning an initial public offering (IPO)
- Businesses that want to reinvest profits back into the company
- Enterprises needing limited liability and long-term growth options
Benefits or Advantages
- Strong liability protection for owners
- Easier to raise funds through stock sales
- Business continuity regardless of ownership changes
- Attractive to investors and institutional partners
- Can offer stock-based employee benefits
Examples or Notable Applications
Major companies like Apple, Microsoft, and Coca-Cola are structured as C Corporations. A tech startup may incorporate as a C Corp to issue equity and raise venture capital.
External Links
This post is for informational purposes only and does not constitute legal or financial advice.