C Corporation Definition
Short Definition
C corporations are an entity election made by a business which allows the shareholders or owners of a business to be treated as separate entities. Using this classification, the profits of the C corporation are taxed as they are earned and the shareholders are taxed when the profit is distributed to them.
Expanded Definition
While there are several legal entities you can choose from when operating a business, C corporation elections are most commonly made by large companies. This is due in part to the additional cost associated with establishing and operating this type of highly regulated business entity. Since the shareholders are considered owners of a C-Corporation, their personal assets are usually protected from legal action. Unfortunately, double taxation applies which means both the C-Corporation and the shareholders pay income tax.
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