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A C-Corp, short for C-Corporation, is a legal business entity in the United States, structured under Subchapter C of the Internal Revenue Code. C-Corps are distinct from other types of corporate entities, such as S-Corporations or Limited Liability Companies (LLCs), in terms of taxation and regulations.
C-Corps have several key characteristics:
Limited liability: Shareholders in a C-Corp enjoy limited liability, which means their personal assets are protected from the corporation's debts and legal obligations. The corporation itself is held responsible for these obligations.
Separate legal entity: A C-Corp is considered a separate legal entity from its owners or shareholders. It can enter contracts, own property, and sue or be sued in its own name.
Perpetual existence: A C-Corp can continue to exist indefinitely, regardless of changes in ownership or management.
Ownership: Ownership in a C-Corp is represented by shares of stock. These shares can be privately held or publicly traded, depending on the corporation's structure and goals.
Double taxation: One of the primary disadvantages of a C-Corp is double taxation. The corporation is taxed at the corporate level on its net income, and shareholders are taxed again on dividends they receive. This contrasts with entities like S-Corporations and LLCs, which are typically taxed as pass-through entities, avoiding double taxation.
Management structure: C-Corps have a well-defined management structure, typically consisting of a board of directors responsible for overseeing the corporation's affairs and making strategic decisions, and officers responsible for day-to-day operations.
Regulatory compliance: C-Corps are subject to more extensive regulations compared to other business structures, such as regular financial reporting and adherence to corporate governance standards.
C-Corps are a popular choice for businesses that intend to raise capital through the issuance of stock or plan to go public in the future. They can also be beneficial for businesses seeking a more formal management structure and the potential for perpetual existence.
Published: Mar 29, 2023
Updated: May 26, 2023
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