What is a "C" Corporation

C Corporations are ordinary business corporations that have not elected to be treated as Subchapter S corporations.

A C corporation (or C corp.) is a corporation in the United States that, for Federal income tax purposes, is taxed under 26 U.S.C. § 11 and Subchapter C (26 U.S.C. § 301 et seq.) of Chapter 1 of the Internal Revenue Code.

The IRS C Corporation information page

You must file with the respective State to register the business.

See a comparison matrix between the different organizations

Advantages

1.  Limited liability: Shareholders and owners are typically not personally responsible for the debts and liabilities of the business.

2.  Number of Shareholders:  No restriction as to the number of shareholders.

3.  Loss carry forward:  Favorable loss carry-forward rules. Financial losses experienced in one year can be carry forward to future years.  

4.  Who can be shareholders:  Shareholders can be individuals or other entities (foreign or domestic).

5.  Classes of Stock:  Can have multiple classes of stock.  Each class of stock can have different voting rights.

6.  Going Pubic (IPO):  C Corporations can make a public offerings and have their stocks traded on a stock exchange.

Disadvantages

1.  Two levels of taxation.  C Corporations pay corporate income tax and dividends paid out to shareholders are taxed as well.

2.  Accumulated income tax:  Must pay Corporate Income taxes.

3.  Pass Through losses:  Pass-through of losses to investors is not available.

4.  Administration requirements:  Required to follow the same internal and external corporate formalities, such as adopting bylaws, issuing stock, holding initial and then annual meetings of shareholders and directors, and keeping the minutes from these meetings with the corporate records. Examples of external requirements include filing annual reports, which are required by the state, and paying the necessary annual fees.