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Table of Contents
- 1 What Is a C Corporation? Corporations are defined mostly by their tax structure and liability protections. When people talk about corporations, they are most often referring to general corporations, or “C corporations.” The IRS starts out classifying every corporation as a C corporation, which means the corporation pays taxes on its income. C corporations are usually double taxed, once as a corporation and again through the shareholders’ personal income taxes. C Corporation vs S Corporation C corporations are only referred to as C corporations to more easily distinguish them from S corporations. Although all corporations are initially C corporations, if the corporation meets certain tax code requirement, the shareholders can file to be classified as an S corporation by the IRS. By doing so, the corporation will no longer pay taxes, rather the income passes to the shareholders who then report the business’ income on their personal tax return and only pay taxes on the dividends once. C Corporation vs LLC There are advantages and drawbacks to limited liability companies (LLCs). Similar to an S corporation, LLCs pay taxes either as a sole proprietorship (for single member LLCs), or as a partnership. The net income from each year is taxed on the LLCs members’ individual income tax return, and is therefore only taxed one time. LLCs can be managed more informally, as the government oversight on them is not as speculative as that of a C corporation. C Corporation Advantages
- 2 Disadvantages of a C Corporation
- 3 Forming a C Corporation
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