C Corporation Definition: A C corporation (or C corp) is a legal structure for a business in which the owners, or shareholders, are taxed independently from the corporation. C corporations are the most common type of corporation in the United States and they are a wholly separate legal entity from their owners. C corps pay taxes on their income and may be organized for the specific purpose of conducting business, in which case it can also be called a “doing business as” (DBA) entity.
A C corporation is owned by shareholders, who elect the board of directors and control the company through their ownership share. In addition to electing directors, shareholders also elect two individuals to serve as managers: a Chief Executive Officer (CEO) and a Vice President of Finance.
A C corp is taxed at the corporate level, which means that all of its income, including profit and dividends, are taxed at a flat rate. Dividends are then paid to shareholders, and those dividends are then taxed at each shareholder’s individual tax rate.
A C corporation is a separate legal entity from its owners, called shareholders. When you own shares in a C corporation, your tax liability is determined by what percentage of the company’s profits you receive as distributions. The IRS taxes dividends received by shareholders at their marginal tax rate.
Alternatively, S corporations are pass-through entities that don’t have an independent existence apart from their owners. They’re taxed just like partnerships or sole proprietorships. They don’t have to file an annual Form 1120S unless they elect to pay quarterly estimated taxes (Form 1120-F).
Since S corps and their owners aren’t taxed as separate entities, they’re not required to file Forms W-2 or 1099s with the IRS because there are no distributions made between them and their shareholders; however, if any cash is distributed within the year, then this must be reported on those forms along with any other income earned throughout that period, such as interest payments made between partners/shareholders during that time frame.
A C corporation is a separate legal entity from its owners. It’s an actual company that can own property, conduct business, pay taxes, etc. You’ll have to file your taxes as a C corporation if you want to be taxed as one (although you can elect not to do this).
A Limited Liability Company (LLC) is also a separate legal entity but has less protection from liability than a corporation.
LLCs are pass-through entities, meaning they don’t pay self-employment tax, and therefore pass their income or losses directly onto their owners according to their ownership percentage in the company.
A C corporation is a business structure that offers limited liability protection to its owners while allowing them to enjoy the benefits of pass-through taxation. If you’re thinking of starting a business or are already running one and looking for ways to minimize your tax liability, a C corporation may be the right choice for you.
Join the 550,000+ independent landlords who rely on TurboTenant to create welcoming rental experiences.
No tricks or trials to worry about. So what’s the harm? Try it today!