A C corporation is a separate legal entity that, in the eyes of the law, is separate from its owners. In most cases, the corporation shields its owners, who are called shareholders, from personal liability for the debts and obligations of the corporation.
Advantage of a C corporation
- Owners are liable only for the debts and obligations of the corporation’s u to the amount of their investment.
- The mechanics of raising capital is easier.
- No restrictions exist on the number of share holders, which differs firm subchapter S corporations.
- Stock is liquid traded on a major stock exchange.
- The ability to share stock with employees through stock option or other incentive plans can be a powerful form of employee motivation.
Disadvantage of a C corporation
- Setting up and maintaining one is more difficult than for a sole proprietor ship or a partnership.
- Business losses cannot be deducted against the shareholders other sources of income.
- Income is subject to double taxation, meaning that it is taxed at the corporate and the shareholder levels.
- Small shareholders typically have little voice in the management of the firm.