Business Entities According to the IRS: Corporations

For the next installment of our series on business entities according to the IRS, today we will focus on c-corporations (s-corporations will be the topic of the next blog). We’ll discuss what a c-corporation is, the federal tax rate for a c-corporation, and who benefits the most from filing as a c-corporation.

A c-corporation, sometimes known as a c-corp, is a legal entity that is completely separate from its owners. Corporations can make a profit, pay taxes, and be held liable for their actions as a corporation. Corporations provide the most protection from personal liability to its owners, but they often require higher filing fees, extensive record keeping, and more detailed reporting.

In 2020, c-corporations will be taxed at the corporate income tax rate of 21%. Unlike sole proprietors, partnerships, and LLCs, corporations pay income tax on their profits. In some cases, corporate profits are taxed twice. First, when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.

Corporations have an advantage when it comes to raising capital because they are always able to sell stock. They are also a great choice for businesses that plan to eventually “go public” and allow their stock to be sold or bought by anyone. If you have any other questions about whether filing as a corporation is right for you, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions. Please contact us at (618) 997-3436.