New LIVE Course: Learn the Practical Nuances of IPR Drafting by Adv. Gautam Matani. Register Now!
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

C Corps or C Corporation is a legal entity (a company), that protects the owners from business liabilities. In simple words, it protects the owner’s personal assets from creditors in worst-case scenarios. The owner is responsible only for his/her stake in the company. A C Corp can have numerous business owners (shareholders) and various asset classes, which makes it different from the other legal entity. Though, just like the benefits it gets, it also attracts tax issues for C Corporation in tax filing as there are double taxation levied.

The Big Picture

A C Corp has to pay taxes twice, once at the entity level and second when the profit is distributed to shareholders. A C Corp can opt for being taxed as an S Corp to avoid double tax payments, but in absence of such election, it pays taxes on its income after all the settlement of losses, deductions and credits are adjusted. When it distributes profit to its shareholders, in terms of dividend, it is liable to pay the tax again. After which, even shareholders have to pay taxes on their personal income and dividend received, reflecting tax issues for C Corporation.

Even apart from the taxation requirements, there are other complications involved in terms of running the C Corps like holding the shareholders’ meeting at least once a year and meticulous minutes of that meeting to be kept. C Corps have stringent rules compared to an LLC.

Though, there are a few benefits of C Corps as well. Like, benefits provided to employees can be deducted from the income. It allows employees including owners and shareholders to avail such deduction advantages. In addition to that, the nature of this corporation protects its owners from offsetting any losses from his/her personal income or assets. It can have as many shareholders as it fits to, though after a certain number, the corporation has to get registered under Securities and Exchange Commission (SEC).

District Tax Rates of C Corporations

There are various tax rates applied to a C Corp based on the income received, increasing tax issues for C Corporation. It has to report under Form 1120 to file its income, tax credits and deductions.

  • $0 + 15 % on income more than $50,000.
  • $7,500 + 25 % on a taxable income above $50,000 to $75,000.
  • $13,750 + 34 % on a taxable income above $75,000 to $100,000.
  • $22,250 + 39 % on a taxable income above $100,000 to $335,000.
  • $113,900 + 34 % on a taxable income above $335,000 to $10,000,000.
  • $3,400,000 + 35 % on a taxable income above $10,000,000 to $15,000,000.
  • $5,150,000 + 38 % on a taxable income above $15,000,000 to $18,333,333.
  • 35 % of a taxable income above $18,333,333.

Details, Details and More Details

Well, paying taxes and that too double taxes can be difficult as there are so many details attached with it. Like a C Corp’s revenue as an individual revenue can be qualified for a 20% business income deduction under section 199A. Also, individuals are limited to deductions at a maximum $10,000 for state income tax, but the same doesn’t apply when it comes to C Corporations.

C Corps comes with a set of advantages and tax issues, but you do not have to worry as we at Meru Accounting have experts working out such complexities for you with ease. Contact us now!

Brief for Graphics

A C corporation is a legal entity that separates its owners’ assets and income from the entity safeguarding the personal assets and income from creditors. There are several Tax issues for a C Corp as it has to pay double taxes; one at the entity level and once when the income is distributed to shareholders in terms of dividends. A C Corp has to file income, deductions and tax credits under Form 1120. Meru Accounting has experts helping you out on filing such taxes, thus you do not have to worry about any complexities.

"Loved reading this piece by Meru Accounting?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"

Tags :

Category Others, Other Articles by - Meru Accounting