C Corporation Definition
The C Corporation definition (C-corp) is a form of business which is owned by several C-corp shareholders or holders of stock within the company. Many larger businesses adopt this model so that they can receive the large amount of financing needed to grow the company further.
C Corporation Explained
A C-corp is formed when a group puts together articles of incorporation and files these with a state. Some states carry more benefits, like Delaware, making it more appealing to set the corporation up through that state. Once articles of incorporation have been filed with the state then the C corporation receives its status as an official corporation when it gets a certificate approving the articles. The company can then issue shares to the general public after all financials are in compliance with GAAP. C corporations are the only type of entity stock exchanges list.
C corporation advantages include limited liability for management running the company. However, management is liable to answer to a Board of Directors who are responsible for ensuring that the company is acting in the best interest of shareholders. This means that a C-corp’s number one goal is to maximize shareholder wealth.
C corporation disadvantages are that the entity can receive double taxes. C-corp double taxation occurs when a company is taxed as a legal stand alone entity. Then the second tax comes if the C-corp issues dividends to its shareholders. Despite this disadvantage the C-corp is one of the most common business forms for larger companies.
If you want to learn more financial leadership skills, then download the free 7 Habits of Highly Effective CFOs.