What Is A C Corporation? Your Complete Guide to C Corps

Examples of Well-Known C Corps

Many products and services you use daily are probably created by C Corps because most of the larger businesses in the US are structured this way.

Today, there are about 1.4 million small businesses organized as C-Corporations in the US, and more than half of all corporations (and 64% of Fortune 500 companies) choose to incorporate in Delaware. Why? Most corporations choose Delaware because of the state’s flexible, modern corporation laws and because of its Court of Chancery that rules on corporate disputes without the need for a jury, meaning corporate cases won't get stuck in legal limbo behind a bunch of non-corporate issues.

Asset Protection

Because a C Corp is a separate legal entity, the business’s liabilities and debts are separated from the liabilities of the directors, investors and shareholders. This means that the owners aren't personally liable for the business's obligations, and their personal assets won't be at risk. This doesn’t apply in all cases, like if corporate funds are misused, there is willful fraud or certain rules and regulations aren’t followed.
Flexible Ownership

A C Corp is owned by whoever holds the stocks it issues. Investors can buy and sell stocks, and if the company’s shares are publicly traded, institutions and members of the public can purchase stock in the company.
No Limits on Ownership

Unlike LLCs and S Corps, there’s no limit to how many owners a C Corp can have.
More Capital

C Corps are typically much more attractive to potential investors, like venture capitalists and shareholders, because this type of business structure allows for wider ownership of the corporation.

Double Taxation

At tax time, a C-corporation will file a corporate tax return and pay taxes on its profits. Then, the post-tax income may be distributed to shareholders in the form of dividends. The shareholders are then taxed on dividends, which effectively forces the owners of a corporation to pay taxes on the same earnings twice. This is called “double taxation.”
A Lot of Rules

There are a lot more formalities, regulations and legal rules C Corps have to follow than there are for S Corps and LLCs. C Corps must hold and document director and shareholder meetings; prepare and record minutes for these meetings; draft, agree and document major corporate resolutions and decisions; create, adopt and update bylaws as needed; issue stock to shareholders and record stock issues and transfers; maintain an accurate stock register; maintain corporate records; and record and file the names, addresses and other information about corporate officers or directors.
Losses Aren’t Deductible

Other business structures, like LLCs and S Corps, let owners deduct the business’s losses on their personal tax returns. With C Corps, this isn’t allowed. You can only deduct these losses on the corporation’s tax return.
Higher Costs

From starting up to sustaining the business, C Corps can cost a lot more to maintain than LLCs, S Corps or sole proprietorships.

Differences Between a C Corp, S Corp & LLC

Two other popular business entity structures in the US are the S Corp and the LLC. They provide many of the same protections as a C Corp, but have less formal rules on taxation, governance, and compliance. If you’re registering as any of these entities, you’ll most likely have similar requirements to get started. For example, every business will need to file Articles of Incorporation and get a registered agent. Most of the differences between entities are more noticeable once you get up and running.

One of the most significant differences between forming C Corps and S Corps/LLCs is how income is taxed.

Entity Type

LLC

C-Corp

S-Corp

Non-Profit

Has to file a separate tax return

Varies

Can pass on their profits to shareholders as dividends

Varies

Can have more than 75 shareholders

Varies

C Corporation Taxation Guide

Before 2018, C Corp tax rates depended on how much profit the business made. But, the Tax Cuts and Jobs Act (TCJA) of 2018 made it so C Corps pay a flat rate of 21% no matter how much profit they make.

Under this new law, the max individual tax rate is now 37% and allows for a 20% deduction for passthrough income, equalling a max 29.6% tax rate for passthrough income for LLCs and S Corps. This max is higher than the 21% for C Corps, but C Corps still have to deal with double taxation, meaning the C-corporation pays taxes on its profits then shareholders pay taxes on dividends (and dividends may be taxed 3.8% if the taxpayer’s adjusted gross income is more than $200K).

So, while the C Corp rate of 21% may look lower, the double taxation and dividends tax can put it closer to the 29.6% passthrough rate. If lower taxes are the only reason you’re considering starting or converting to a C Corp, talk to a tax professional in your state to figure out the advantages and disadvantages of each business entity for your personal situation.

Select your state above.

And see results over here

Alabama

C-Corp

$236

Alaska

C-Corp

$250

Arizona

C-Corp

$95

Arkansas

C-Corp

$50

California

C-Corp

$105

Colorado

C-Corp

$50

Connecticut

C-Corp

$250

Delaware

C-Corp

$109

Florida

C-Corp

$70

Georgia

C-Corp

$100

Hawaii

C-Corp

$51

Idaho

C-Corp

$100

Illinois

C-Corp

$179

Indiana

C-Corp

$98

Iowa

C-Corp

$50

Kansas

C-Corp

$80

Kentucky

C-Corp

$55

Louisiana

C-Corp

$75

Maine

C-Corp

$148

Maryland

C-Corp

$218

Massachusetts

C-Corp

$265

Michigan

C-Corp

$60

Minnesota

C-Corp

$155

Mississippi

C-Corp

$53

Missouri

C-Corp

$60

Montana

C-Corp

$70

Nebraska

C-Corp

$68

Nevada

C-Corp

$725

New Hampshire

C-Corp

$125

New Jersey

C-Corp

$130

New Mexico

C-Corp

$100

New York

C-Corp

$130

North Carolina

C-Corp

$127

North Dakota

C-Corp

$100

Ohio

C-Corp

$100

Oklahoma

C-Corp

$52

Oregon

C-Corp

$100

Pennsylvania

C-Corp

$131

Rhode Island

C-Corp

$230

South Carolina

C-Corp

$135

South Dakota

C-Corp

$150

Tennessee

C-Corp

$108

Texas

C-Corp

$300

Utah

C-Corp

$54

Vermont

C-Corp

$125

Virginia

C-Corp

$75

Washington

C-Corp

$200

Washington DC

C-Corp

$220

West Virginia

C-Corp

$100

Wisconsin

C-Corp

$100

Wyoming

C-Corp

$102

Is Starting a C Corp Right for Small Businesses?

When deciding whether or not to start or convert a company to a C Corporation, entrepreneurs should first consider their business goals. Will you publicly trade shares through having an IPO? C Corps are much more attractive to potential investors because it allows wider ownership of the corporation. You should also consider whether the level of paperwork and taxation structure is the right fit for the business.

While the C Corp is a well-known business structure, there are other options for entrepreneurs who are forming small businesses in the US. In fact, according to the Small Business and Entrepreneurship Council, the number of C corporations has been declining since the mid-1980s, while S Corps, LLCs, partnerships and sole proprietorships have become more popular. This is most likely due to the high corporation tax rates that C Corporations had to pay before the 2017 Tax Cuts and Jobs Act. Before this act, C Corps could pay tax rates as high as 35%, but today they all pay a flat rate of 21%.

Will have more than 100 shareholders
Are willing to deal with extra tax obligation
Hope to have an IPO someday
Will issue different classes of stock
Have shareholders who aren’t US citizens or residents

What are the differences between officers, directors and shareholders?

A corporation has all three of these positions: officers, directors and shareholders. Shareholders are technically the owners of the corporation and are responsible for electing the directors. Directors guide the business and are involved in the big decisions of the corporation. Officers are elected by the directors and run the corporation's day-to-day operations. Depending on your state’s rules, these do not need to be separate people.

What is Form 2553?

If your business is a C Corporation but you'd rather file taxes as an S Corporation, you need to notify the IRS in advance by filing the appropriate paperwork. IRS Form 2553, “Election By a Small Business Corporation,” is required to be filed with the IRS to switch a C Corporation to S Corporation status for federal taxation purposes. To understand how much you could save in taxes by forming an S Corporation, check out our S Corporation Tax Calculator.

What is Form 1120?

During tax time, C Corps must fill out Form 1120. This form allows domestic corporations to report their income, gains, losses, deductions, and credits and figure out income tax liability.

Can Incfile help me create and manage my C Corp?

Absolutely! When you form your C Corp through Incfile’s Gold or Platinum formation package, you automatically get a Corporate Kit for your corporation. This kit is a collection of forms, papers and other items that makes it easier for you to create and manage your C Corp.

The Gold and Platinum kits include:

A binder and slipcase personalized with your business name
20 certificates for corporate stockholders
Corporate forms and documents, including formation papers
A transfer ledger
Tabbed, Mylar separators to keep everything organized

The Platinum kit also includes:

A company seal and embosser for embossing your important documents
A box case for your documents that you can display in your office

Form Your C Corp Today for $0

Forming a C Corporation can be tricky, so let us do the hard work for you. Incfile has helped form thousands of businesses, and our experts are always here for you. Incorporate your business with Incfile for as little as $0 plus the state fee and get a free Registered Agent for an entire year.

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Is a C Corporation Right for You?