An American corporate entity that is taxed independently from its owners is a C corporation. The corporation is regarded as a separate legal entity from its stockholders, which entitles it to legal rights such as the ability to contract, borrow money, and bring or defend legal actions in its own name. The Internal Revenue Code subchapter that oversees this particular business entity type is represented by the “C” in “C corporation.”
A C company has the benefit of providing its stockholders with limited liability protection, which is one of its benefits. This indicates that the shareholders’ personal assets are distinct from those of the corporation and are therefore safe from loss in the event that the latter files for bankruptcy or is sued. C corporations can also raise money from investors by issuing stock, which makes it simpler for them to finance their operations and grow their firm.
Amazon is a publicly traded firm that is registered as a Delaware corporation, not a C corporation. Amazon was a C corporation before to going public in 1997, nonetheless. Being a publicly traded company, Amazon is required to abide by SEC rules and make public information about its operations and financial performance.
Operating as a C corporation has significant drawbacks despite its advantages. Double taxation, which happens when a corporation pays taxes on its income at the corporate level and then its shareholders pay taxes on their dividends or capital gains at the individual level, is one of the main drawbacks. Another drawback for small firms is the difficulty and expense of complying with state and federal regulations.
What makes you decide to run as a C corporation, then? Your priorities and business objectives will determine the response. A C corporation can be the ideal option for you if you intend to expand your business, attract new investors, or go public. A limited liability corporation (LLC) or a sole proprietorship are two more business forms to take into account if you are a small business owner who wishes to keep things simple and prevent double taxes.
A C corporation, which offers its stockholders limited liability protection and permits them to acquire money from investors, is a well-known type of corporate entity in the United States. However, it also has significant disadvantages, such as the cost of regulatory compliance and double taxes. It’s critical to examine the advantages and disadvantages of operating as a C corporation while taking your company’s goals and priorities into account.