"C" Corporations

In General: The "C-Corporation" designation merely refers to a standard, general-for-profit, state-formed corporation. The ?C? comes from subchapter C of the Internal Revenue Code which controls the method of taxing profits and operations.

Double Taxation: Generally, the C-corporation is taxed on its own profits; then, any profits paid out in the form of dividends are taxed again to the recipient as dividend income at the individual shareholder's tax rate. This creates a ?double tax? on the same income.

Tax Planning a Must: With proper tax planning, most small corporations avoid paying dividends. Rather, owner-employees are paid salaries and fringe benefits that are deductible to the corporation. The result eliminates the corporate level profit, but does not eliminate self-employment taxes which can be substantial

Annual Tax Filings: The C-corporation files its own annual corporate tax forms each year using IRS form 1120. Requisite state forms may also be required.

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