C corporations are defined under the United States Tax Law, referring to businesses that are taxed separately from its owners. These regulations are described under subchapter C of the United States Internal Revenue Code. This is unlike S corporations, in which a company’s earnings are passed to the owners and shareholders of the company, and then taxed as personal income.
C corporations are typically owned by shareholders who give the mandate to run the day to day businesses to a board of directors. For the sake of taxation purposes, C corporations are usually required to submit their annual financial records to the state attorney general.
The fact that C corporations are liable to pay income tax without paying attention to the company’s owners means that they are considered as legal, independent entities. This means that if the corporation’s owners change or become deceased, the company itself does not change and remains in existence.
There are several benefits of running an organization as a C corporation. One is that the owners and shareholders of such an organization have limited liability on account of the company’s independent status. As a result, any debts incurred by the company are not considered as the owners’ liabilities. In addition to that, any lawsuits arising from corporate issues cannot be directed to the individuals who own the company.
It is also possible for a C corporation to consider the cost of employee benefits as a business expense. For instance, if it offers health insurance to all employees, these benefits will legally be considered as business expenses, and the beneficiaries will not have to pay any tax on them.