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C Corporations
A "C" Corporation, or simply a Corporation, is the most common form of incorporation. It is considered by law to be a separate and legal entity. It offers the greatest flexibility with respect to ownership and the free transferability of shares. Although a "C" Corporation allows for many advantageous tax deductions and benefits, small business owners may be at a disadvantage due to the double taxation associated with a "C" Corporation. Income is first taxed at the corporate level at corporate tax rates. Then when the corporation issues dividends to its shareholders, the same money is taxed again at the shareholder level (income generated by the corporation is taxed twice).
Advantages
- Believed to have a less chance of being audited by the government (as opposed to sole proprietor or LLC)
- Shareholders have limited personal liability
- Can deduct the cost of benefits as a business expense
- Can split corporate profit among shareholders and the corporation, paying a lower overall tax rate
- Unlimited amount of shareholders
- Can raise additional funds through the sale of shares
- US Citizenship is not required to own or invest in a C Corporation
- S Corporation status can be elected if certain requirements are met, enabling the company to be taxed similarly to a partnership
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