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Template:Taxation C corporation refers to any corporation that, under United States income tax law, is taxed separately from its owners. Most major companies (and many smaller companies) are treated as C corporations for U.S. income tax purposes.

C corporation vs. S corporation Edit

Shareholders of a corporation may elect to treat the corporation as a flow-through entity known as an S corporation. An S corporation is not itself subject to income tax; rather, shareholders of the S corporation are subject to tax on their pro rata shares of income based on their shareholdings.[1] To qualify to make the S corporation election, the corporation's shares must be held by resident or citizen individuals or certain qualifying trusts. Unlike corporations treated as S corporations, a corporation may qualify as a C corporation without regard to any limit on the number of shareholders, foreign or domestic.

Forming a corporation Edit

In the United States, corporations are formed under laws of a state or the District of Columbia. Procedures vary widely by state. Some states allow formation of corporations through electronic filing on the state's web site[2] or very quickly.[3] All states require payment of a fee (often under USD200) upon incorporation.[4] Corporations are issued a "certificate of incorporation" by most states upon formation. Most state corporate laws require that the basic governing instrument be either the certificate of incorporation or formal articles of incorporation. Many corporations also adopt additional governing rules knows as bylaws. Most state laws require at least one directors and at least two officers, all of whom may be the same person. Generally there are no residency requirements for officers or directors.

Financial statements Edit

Corporations are not required to issue financial statements in the United States. Financial statements may be presented on any comprehensive basis, including an income tax basis. There is no requirement for appointment of auditors.

Distributions Edit

The laws of most states permit distribution of any amount of money or property by a corporation to its shareholders that does not render the corporation insolvent. Any distribution from the earnings and profits of C corporations is treated as dividend for U.S. tax purposes.[5] Earnings and profits is a tax concept similar to retained earnings.[6] Exceptions apply to treat certain distributions as made in exchange for stock rather than as dividends. Such exception include distributions in complete termination of a shareholder's interest[7] and distributions in liquidation of the corporation.[8]

Tax rates Edit

Template:As of, the IRS lists the following tax rate schedule for "[m]ost corporations", except "qualified personal service corporations" and certain other cases[9]:

Taxable Income ($) Tax Rate Of amount over
Over But not over
$0 $50,000 15% $0
50,000 75,000 25% + $7,500 50,000
75,000 100,000 34% + 13,750 75,000
100,000 335,000 39% + 22,250 100,000
335,000 10,000,000 34% + 113,900 335,000
10,000,000 15,000,000 35% + 3,400,000 10,000,000
15,000,000 18,333,333 38% + 5,150,000 15,000,000
18,333,333 35% 0

See IRS Publication 542, Corporations for details about taxation of corporations.

Notes and referencesEdit

See alsoEdit

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