A C-corporation, or C-corp, is a legal business entity that shareholders own. Those shareholders elect a board of directors, who in turn choose a management team. Major corporations that issue shares of stock via the New York Stock Exchange (NYSE) and the NASDAQ are C-corporations, but privately held small businesses can also be C-corporations. 

The Internal Revenue Service (IRS) taxes a C-corp for its business income, meaning its owners must also pay personal income tax on money earned from stock dividends. A business can avoid double taxation by organizing as a limited liability company (LLC) or by seeking [S-corporation](https://www.masterclass.com/articles/s-corporation-guide) status, but it will be subject to other restrictions such as the number of shareholders it can have. A C-corporation also grants limited liability protection to its owners. If the company incurs debt or faces a lawsuit, the business owners are not held personally responsible, and their personal assets are not at risk. A lender or a litigant can go after the business itself—not its individual owners.

An S-corporation, or S-corp, is a business entity designated under Subchapter S of the Internal Revenue Service's internal revenue code. Sometimes referred to as a "small business corporation," it combines the protection of an LLC with the corporate-level status of a C-corp. 

The IRS grants certain tax advantages to a business with S-corp status. The corporation does not pay federal income tax; rather, its profits pass through to the business owners, who report them on their personal income tax returns. A business with S-corporation status avoids paying double taxation on its corporate income. An S-corporation also grants limited liability to its owners. 

C-corporations and S-corporations differ in a few ways.

- __Taxation__: An S-corp is a pass-through entity that does not pay corporate tax. A C-corp must pay taxes on its business income, and then its owners pay federal income tax on their corporate dividends.
- __Membership__: The internal revenue code caps S-corporation membership at 100 owners. A C-corporation can publicly issue stock certificates and take on an unlimited number of owners. All publicly traded corporations are C-corporations.
- __Types of owners__: The owners of an S-corp must be individuals, trusts, estates, or non-profits. Any entity type can invest in a C-corp, including institutional investors such as a mutual fund.
- __Class of stock__: An S-corporation can only issue one class of [common stock](https://www.masterclass.com/articles/common-stock-vs-preferred-stock-explained). A C-corporation can issue multiple classes, such as Class A shares, Class B shares, common shares, and preferred shares.
- __Nationality__: An S-corporation must be domestically based, and its owners must be U.S. citizens. A C-corporation can be based anywhere.

If you aim to acquire many investors, have international partners, or engage in overseas sales, a C-corporation is the appropriate entity type for your business. 

1. __Select a business name__. Your C-corp will be a legal entity, and it must have a legal name registered with the government. Some companies have one legal name, but do business under another name. This is called a DBA, which stands for "doing business as."
2. __File articles of incorporation__. To establish your business, you must submit articles of incorporation to your state's secretary of state. Expect to pay a filing fee. After you’ve filed successfully, the state will send you a certificate of incorporation.
3. __Obtain an Employer Identification Number and a bank account__. The business will need an Employer ID Number (EIN) from the IRS. It will also need its own business bank account.
4. __Create an operating agreement__. A business's operating agreement establishes laws and bylaws at the shareholder level. It names ownership stakes, can set limits on the number of shareholders, and sets rules for financial distributions.
5. __Name a registered agent for the business__. A C-corporation is required to have a registered agent who accepts legal documents and tax documents on behalf of the company.
6. __Name a board of directors__. A C-corporation must have a board of directors elected by the shareholders of the business. The board must conduct quarterly meetings and make minutes available to all owners.
7. __Issue stock certificates__. C-corp owners are referred to as shareholders, and they should be given stock certificates signifying their ownership stake in the company.
8. __Apply for licenses and permits as necessary__. Some C-corporations operate businesses that are regulated by state and local agencies. Obtain the appropriate permits and licenses before conducting business.
For growing businesses, the advantages of organizing as a C-corporation are clear.

- __Liability protection__: Business owners that organize as a C-corp are shielded from liability for their company's misdeeds or financial debt, meaning their personal assets cannot be seized in a judgment against the business.
- __Avoidance of the self-employment tax__: A C-corporation can pay Social Security and Medicare taxes on behalf of its owners. An LLC cannot, which subjects those owners to a self-employment tax.
- __Easier to raise capital__: As a business entity, a C-corporation is designed to make it easy to take on investors. These investors offer money for shares in the company. S-corporations can also take on investors, but there are limits to who may own shares in an S-corp. 

There are some drawbacks to operating your business as a C-corp.

- __Double taxation__: C-corps incur federal taxes on both their corporate returns and owners' personal tax returns. S-corporations and LLCs avoid this double taxation pitfall.
- __Prohibitive startup costs__: Some states impose strict rules on C-corporations, and the initial filings and startup fees can be prohibitive for some entrepreneurs.
- __More cumbersome to maintain__: A C-corporation must have an active board of directors, and it must submit annual reports to its shareholders. Some states require more filings and fees from C-corps than they do from LLCs or S-corps.

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Business owners have multiple options when it comes to deciding what legal business structure best fits their needs. A C-corporation is one of them.


Business owners have multiple options when it comes to deciding what legal business structure best fits their needs. A C-corporation is one of them.


C-Corporation Guide: How to Form a C-Corporation

A C-corporation, or C-corp, is a legal business entity that shareholders own. Those shareholders elect a board of directors, who in turn choose a management team. Major corporations that issue shares of stock via the New York Stock Exchange (NYSE) and the NASDAQ are C-corporations, but privately held small businesses can also be C-corporations. The Internal Revenue Service (IRS) taxes a C-corp for its business income, meaning its owners must also pay personal income tax on money earned from stock dividends. A business can avoid double taxation by organizing as a limited liability company (LLC) or by seeking <a href='https://www.masterclass.com/articles/s-corporation-guide' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/s-corporation-guide","linkCopy":"S-corporation","category":null}'>S-corporation</a> status, but it will be subject to other restrictions such as the number of shareholders it can have. A C-corporation also grants limited liability protection to its owners. If the company incurs debt or faces a lawsuit, the business owners are not held personally responsible, and their personal assets are not at risk. A lender or a litigant can go after the business itself—not its individual owners.

What Is a C-Corporation?

An S-corporation, or S-corp, is a business entity designated under Subchapter S of the Internal Revenue Service&#39;s internal revenue code. Sometimes referred to as a &quot;small business corporation,&quot; it combines the protection of an LLC with the corporate-level status of a C-corp. The IRS grants certain tax advantages to a business with S-corp status. The corporation does not pay federal income tax; rather, its profits pass through to the business owners, who report them on their personal income tax returns. A business with S-corporation status avoids paying double taxation on its corporate income. An S-corporation also grants limited liability to its owners.

What Is an S-Corporation?

C-corporations and S-corporations differ in a few ways.<ul class="mc-m-4 list-styled"><li class="">Taxation: An S-corp is a pass-through entity that does not pay corporate tax. A C-corp must pay taxes on its business income, and then its owners pay federal income tax on their corporate dividends. </li><li class="">Membership: The internal revenue code caps S-corporation membership at 100 owners. A C-corporation can publicly issue stock certificates and take on an unlimited number of owners. All publicly traded corporations are C-corporations. </li><li class="">Types of owners: The owners of an S-corp must be individuals, trusts, estates, or non-profits. Any entity type can invest in a C-corp, including institutional investors such as a mutual fund. </li><li class="">Class of stock: An S-corporation can only issue one class of <a href='https://www.masterclass.com/articles/common-stock-vs-preferred-stock-explained' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/common-stock-vs-preferred-stock-explained","linkCopy":"common stock","category":null}'>common stock</a>. A C-corporation can issue multiple classes, such as Class A shares, Class B shares, common shares, and preferred shares. </li><li class="">Nationality: An S-corporation must be domestically based, and its owners must be U.S. citizens. A C-corporation can be based anywhere. </li></ul>

What Is the Difference Between a C-Corporation and an S-Corporation?

If you aim to acquire many investors, have international partners, or engage in overseas sales, a C-corporation is the appropriate entity type for your business. <ol class="mc-m-4"><li class="mc-my-4"> 1. Select a business name. Your C-corp will be a legal entity, and it must have a legal name registered with the government. Some companies have one legal name, but do business under another name. This is called a DBA, which stands for &quot;doing business as.&quot; </li><li class="mc-my-4"> 2. File articles of incorporation. To establish your business, you must submit articles of incorporation to your state&#39;s secretary of state. Expect to pay a filing fee. After you’ve filed successfully, the state will send you a certificate of incorporation. </li><li class="mc-my-4"> 3. Obtain an Employer Identification Number and a bank account. The business will need an Employer ID Number (EIN) from the IRS. It will also need its own business bank account. </li><li class="mc-my-4"> 4. Create an operating agreement. A business&#39;s operating agreement establishes laws and bylaws at the shareholder level. It names ownership stakes, can set limits on the number of shareholders, and sets rules for financial distributions. </li><li class="mc-my-4"> 5. Name a registered agent for the business. A C-corporation is required to have a registered agent who accepts legal documents and tax documents on behalf of the company. </li><li class="mc-my-4"> 6. Name a board of directors. A C-corporation must have a board of directors elected by the shareholders of the business. The board must conduct quarterly meetings and make minutes available to all owners. </li><li class="mc-my-4"> 7. Issue stock certificates. C-corp owners are referred to as shareholders, and they should be given stock certificates signifying their ownership stake in the company. </li><li class="mc-my-4"> 8. Apply for licenses and permits as necessary. Some C-corporations operate businesses that are regulated by state and local agencies. Obtain the appropriate permits and licenses before conducting business. </li></ol>

How to Form a C-Corporation

For growing businesses, the advantages of organizing as a C-corporation are clear.<ul class="mc-m-4 list-styled"><li class="">Liability protection: Business owners that organize as a C-corp are shielded from liability for their company&#39;s misdeeds or financial debt, meaning their personal assets cannot be seized in a judgment against the business. </li><li class="">Avoidance of the self-employment tax: A C-corporation can pay Social Security and Medicare taxes on behalf of its owners. An LLC cannot, which subjects those owners to a self-employment tax. </li><li class="">Easier to raise capital: As a business entity, a C-corporation is designed to make it easy to take on investors. These investors offer money for shares in the company. S-corporations can also take on investors, but there are limits to who may own shares in an S-corp. </li></ul>

Advantages of a C-Corporation

There are some drawbacks to operating your business as a C-corp.<ul class="mc-m-4 list-styled"><li class="">Double taxation: C-corps incur federal taxes on both their corporate returns and owners&#39; personal tax returns. S-corporations and LLCs avoid this double taxation pitfall. </li><li class="">Prohibitive startup costs: Some states impose strict rules on C-corporations, and the initial filings and startup fees can be prohibitive for some entrepreneurs. </li><li class="">More cumbersome to maintain: A C-corporation must have an active board of directors, and it must submit annual reports to its shareholders. Some states require more filings and fees from C-corps than they do from LLCs or S-corps. </li></ul>

Disadvantages of a C-Corporation

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Business owners have multiple options when it comes to deciding what legal business structure best fits their needs. A C-corporation is one of them.