GlossaryUS
What is a C corporation?
C corporation — a US company taxed as a separate taxpayer
Short answer
A C corporation is a US company treated as a separate taxpayer: its profit is taxed at company level, then taxed again when shareholders receive it as dividends. It files Form 1120 every year.
Explained
When a corporation is formed, shareholders exchange money, property or both for its capital stock. The corporation does business, makes a profit or loss, pays its tax and distributes profits to shareholders.
The IRS calls this a double tax: the corporation gets no deduction for dividends it pays, and shareholders cannot deduct the corporation’s losses. That is why tax should be weighed carefully when choosing a business structure.
Good to know
- A C corporation files Form 1120 every year, even when it has no taxable income.
- A corporation that has not elected S corporation status is a C corporation for federal tax.
- States may also require an annual report and state taxes (for example, franchise tax in Delaware).
This page is general information, not legal or tax advice. Rules change; check the official source for the latest position or talk to us.
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