What is a "C corporation"?

A C corporation refers to a specific type of legal structure for a corporation characterized by having a distinct tax identity that is separate from its shareholders or owners. This means that the corporation itself is responsible for paying taxes on its income, which can lead to what's commonly known as "double taxation." This occurs because after the corporation pays its taxes on profits, any distributions made to shareholders in the form of dividends are taxed again on the individual level.

C corporations are typically subject to corporate tax rates and are able to retain earnings for reinvestment in the business, allowing for growth and expansion. They can have unlimited shareholders, allowing them to raise capital more easily by issuing stock, which is advantageous for larger companies or those seeking investment.

Understanding this corporate structure is important for tax planning and compliance, as C corporations must adhere to specific regulatory requirements and provide detailed financial reporting. This is quite different from the other options presented, which either misrepresent corporate structures or conflate them with distinct entity types like partnerships or limited liability companies.