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NADefinition
A C-Corporation, often referred to as a “C-Corp,” is a type of business structure that is legally recognized as a separate entity from its shareholders.
What is a C-Corporation?
A C-Corporation is considered a separate legal entity from its shareholders. It can own property, enter into contracts, sue or be sued, and conduct business in its own name. This separation of legal identity provides a level of stability and continuity to the business, as it can continue to exist even if shareholders change or pass away.
One of the primary advantages of a C-Corporation is that it offers limited liability protection to its shareholders. This means that the personal assets of shareholders are generally protected from the debts and liabilities of the corporation.
C-Corporations are subject to a unique tax structure known as “double taxation.” This means that the corporation itself is taxed on its profits at the corporate income tax rate, and then shareholders are taxed again on any dividends they receive from the corporation. Despite this potential for double taxation, C-Corporations offer certain tax advantages, such as the ability to deduct employee benefits and certain business expenses.
Furthermore, C-Corporations have a flexible ownership structure and can have an unlimited number of shareholders. Shareholders can be individuals, other corporations, partnerships, trusts, or other organisations. Ownership is represented by shares of stock, which can be freely transferred or sold.
Example of a C-Corporation
Imagine “Tech Innovate Inc.,” a technology company founded by a group of entrepreneurs. They decide to incorporate their business as a C-Corporation. The company has shareholders who own stock in the corporation, a board of directors responsible for strategic decision-making, and employees who work to develop and market the company’s products. Tech Innovate Inc. enjoys limited liability protection for its shareholders and has the ability to raise capital by issuing additional shares of stock.
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