What is a C corporation?

What Is a C Corporation?

When people talk about big-name companies like Apple or Google, they're usually referring to C corporations. A C corporation is simply a business structure recognized by the U.S. federal tax code—one that operates as a separate legal entity from its owners. This separation is key: it means the company can own property, enter into contracts, and be sued in its own name, shielding the owners (also known as shareholders) from personal liability.

One of the defining traits of a C corporation is how it's taxed. Profits are taxed at the corporate level, and if those profits are later distributed to shareholders as dividends, they’re taxed again on the individual level—this is known as "double taxation." While that might sound like a downside, the structure offers significant advantages, including strong liability protection, easier access to capital, and the ability to go public through an IPO.

Forming a C corporation involves filing articles of incorporation with the state, creating bylaws, and issuing stock. Once established, the corporation must follow formal governance practices, such as holding shareholder meetings and keeping detailed records.

While C corporations are often associated with large, publicly traded companies, any business can choose this structure if it plans to scale, attract investors, or eventually go public. It's a powerful option for entrepreneurs who see long-term growth on the horizon.