What is a C Corporation primarily characterized by?

What is a C Corporation primarily characterized by?

• A. No limitations on the number of shareholders
• B. Income taxed at both corporate and shareholder levels
• C. Pass-through taxation for shareholders
• D. Limited liability for owners and shareholders only

Answer: (B)

A C Corporation is primarily characterized by income being taxed at both the corporate level and again at the shareholder level. This means that the corporation pays taxes on its profits, and then when dividends are distributed to shareholders, those dividends are also subject to personal income tax. This dual taxation is a hallmark of C Corporations, distinguishing them from other business structures like S Corporations, which allow for pass-through taxation, bypassing the corporate tax level. The aspect of having no limitations on the number of shareholders is also true for C Corporations, which can have an unlimited number, but that feature does not fundamentally define their operational structure. Similarly, while limited liability for owners is a characteristic of C Corporations, it is not unique to them, as other business forms such as LLCs also provide limited liability. Pass-through taxation is specifically applicable to S Corporations, not C Corporations, reinforcing the distinct nature of the taxation method for this type of entity.

A C Corporation is primarily characterized by income being taxed at both the corporate level and again at the shareholder level. This means that the corporation pays taxes on its profits, and then when dividends are distributed to shareholders, those dividends are also subject to personal income tax. This dual taxation is a hallmark of C Corporations, distinguishing them from other business structures like S Corporations, which allow for pass-through taxation, bypassing the corporate tax level.

The aspect of having no limitations on the number of shareholders is also true for C Corporations, which can have an unlimited number, but that feature does not fundamentally define their operational structure. Similarly, while limited liability for owners is a characteristic of C Corporations, it is not unique to them, as other business forms such as LLCs also provide limited liability. Pass-through taxation is specifically applicable to S Corporations, not C Corporations, reinforcing the distinct nature of the taxation method for this type of entity.