Call Us: (540) 433-2121

Business Entities: C Corporations

By Dean ‘Mac’ Nichols, Attorney


This is the second of a three-part series on different corporation types.

A C corporation, referred to simply as a corporation, is a business that acts as an independent taxpaying entity that conducts business, realizes net income or loss, pays taxes, and distributes profits to its shareholders. As a separate legal entity, a C corporation is held legally liable for its business’ debts and actions.

C corporations are sometimes viewed as more complex than other business structures; they tend to incur more extensive administrative fees, as well as more complex taxes and legal requirements.

Corporations are formed under the laws of the state in which the business is headquartered. In order to form one, the owner must establish a business name, which is registered with the state government, in Virginia the Articles of Incorporation are filed with the State Corporation Commission. In other states it may be with the Secretary of State. Laws vary from state to state, but in Virginia corporation names must include a corporate designation (Corporation, Incorporated, Limited, etc.) at the end of the business name.

C Corporations must pay federal, state, and—in some cases—local taxes. Unlike some other types of business entities, corporations are required to pay income tax on their profits at the entity level.

A disadvantage to a C Corporation is that its earnings are taxed twice: once within the corporate entity, and then again when dividends are paid to shareholders. The double taxation occurs due to the fact that the dividends paid are not allowed as an expense to the Corporation.

Some of the benefits of utilizing a C corporation include: C Corporation | Layman Nichols

• The ability to “go public” by selling ownership shares in the business through stock offerings. The ability to go public and generate capital through an IPO, or initial public offering, is a major advantage of using a C corporation.
• Corporations offer limited liability; shareholders’ personal assets are protected from liability for business debts.
• Perpetual existence—even if the owner leaves the company, the corporation remains intact.
• C Corporations are taxed on their net income at corporate tax rates. Since this is a lower rate than at the individual level, C Corporations are attractive to businesses that are capital intensive because they can reinvest more of their earnings in the business due to a lower tax rate structure.
• C Corporations, as compared to S Corporations, offer unlimited growth potential since they are not limited in the number of shareholders they are allowed.

Does a C corporation sound like a good fit for your business needs? Call us about setting up your business today.

Wondering what Business & Personal tax documents you need to keep?
Provide us your email and we'll send you
this tax information right away!
Downloaded our free tip sheet yet?
Learn what tax documents you need to keep and
for how long so you are always prepared!
You'll also start receving our monthly tips and resources.
You can unsubscribe at any time.
Download a free tip sheet on which tax documents you need to keep and for how long.