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What Is a C Corp?

Numerous types of corporation exist in society. Such corporations may be classified according to hierarchy, structural organization, industry, and other economic or social categories. It is also possible to categorize corporations based on how they will be taxed. A C Corp is a status given to a corporation based on the extent of taxation they undergo and the extent of liability the corporation’s partners may incur.

A C Corp is a corporate entity created by partners. This entails no personal liability on the part of the partners since the corporation is its own legal entity. Any debt accrued by the C Corp is not charged to the personal accounts of partners.

Each corporation is given a status that is in accordance with the extent of taxation they face. A C Corp status conferred upon a corporation means that the corporation would be taxed based on the profits they make and the dividends its shareholders or partners receive. Thus, taxation is dependent on profits. For example, a corporation classified as a C Corp that earns 50,000 US Dollars annually in profits is subject to 15% taxation, but a C Corp business that earns 10 to 15 million US Dollars annually in profits may be taxed 35%. Employees or partners of a C Corp are also subject to taxation based on their annual income. Thus, a C Corp is subject to dual taxation. However, salary compensation is not taxed since it is not considered as profit. It is then possible for C Corp businesses to increase their salaries and decrease their profit margins in order to reduce the percentage of taxation.

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