C Corporation
A separate legal entity that pays its own corporate income tax. The default corporation type. The only structure that can easily issue multiple classes of stock and raise venture capital. Subject to 'double taxation' on dividends.
Ownership
Unlimited shareholders. Shareholders can be individuals, corporations, partnerships, trusts, foreign persons. No residency requirements.
Pass-Through Taxation
No (entity-level tax)
State Filing Required
Yes
Self-Employment Tax
No
Strongest. Shareholders' personal assets are protected from corporate debts and lawsuits. The corporate veil is well-established in case law.
The corporation pays federal income tax at the corporate rate (21% flat rate since 2018 TCJA) on its profits, using Form 1120. When profits are distributed as dividends, shareholders pay tax again on their personal returns. This is 'double taxation.'
Self-Employment Tax
No. Owner-employees are W-2 employees of the corporation. They pay FICA payroll tax (7.65% employee share) on wages, and the corporation pays the matching 7.65% employer share. No self-employment tax.
How to Form
File Articles of Incorporation with the state, adopt corporate bylaws, issue stock, hold initial board meeting, appoint directors and officers. More paperwork than LLC formation.
Ongoing Compliance
Hold annual shareholder and board meetings, keep minutes, file annual reports, pay state franchise taxes, file Form 1120 annually, run payroll for all employees including owner-employees.
- Easiest structure for raising venture capital and institutional investment
- Can issue multiple classes of stock (common, preferred)
- No ownership restrictions
- Lower corporate tax rate (21%) may benefit high-profit businesses
- Fringe benefits (health insurance, retirement) are deductible
- Stock can be publicly traded
- Double taxation on dividends (corporate level + personal level)
- Most expensive and complex to form and maintain
- Significant ongoing compliance (meetings, minutes, filings)
- Harder to extract profits tax-efficiently
- Cannot pass through losses to shareholders
Startups planning to raise venture capital, companies planning to go public, businesses with many shareholders, and profitable companies that benefit from the 21% corporate rate. Not ideal for small businesses that want to distribute profits to owners.
- •Form 1120 (Corporate Return)
- •Form 1120-W (Estimated Tax)
- •Form 941 (Quarterly Payroll)
- •W-2 for employees
- •Form 1099-DIV (Dividends)
See our Tax Forms reference for details on each form.