A C-corporation is a fictitious legal entity that is created to run a business by common ownership. In other words, one or more people get together and create a C-corporation by creating ownership shares. The corporation itself is nothing more than a legal entity. The corporation can own assets and have liabilities separate from its owners– the shareholders. This is one of the great advantages C-corporations have over Sole proprietorships and Partnerships. The C-corporation’s liabilities cannot pass onto the owners.
Explanation:
This is the main reason why business owners decide to incorporate. The C-corporation provides limited liability protection. The reason I refer to this as “limited liability” instead of unlimited liability is because the owners are always liable for their investment in the corporation. If the corporation goes bankrupt, the owners will lose the money they paid for their shares. Here’s an example of the advantages of a C-corporation.
In a nutshell:
- A C Corporation legally separated owners' or shareholders' assets and income from that of the corporation.
- C corporations limit the liability of investors and firm owners since the most that they can lose in the business's failure is the amount they have invested in it.
- C corporations are mandated to hold annual meetings and have a board of directors that is voted on by shareholders.
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