What is a characteristic of a C Corporation regarding taxation?

What is a characteristic of a C Corporation regarding taxation?

• A. It is not subject to corporate taxes
• B. It is taxed as a pass-through entity
• C. It must pay taxes at the corporate level
• D. It can avoid state taxes

Answer: (C)

A key characteristic of a C Corporation is that it is subject to taxation at the corporate level. This means that the corporation itself pays taxes on its profits before any distributions to shareholders, such as dividends, which are subsequently taxed again at the individual level. This double taxation is a significant aspect of C Corporations and contrasts with other types of business entities, such as S Corporations or partnerships, which are typically treated as pass-through entities for tax purposes. In the context of corporate taxation, a C Corporation must file a corporate income tax return (Form 1120) and is subject to federal corporate income tax rates. This structure is fundamental to understanding how C Corporations operate financially and how their profits are taxed, impacting both their strategies regarding profit distribution and their overall tax liabilities.

A key characteristic of a C Corporation is that it is subject to taxation at the corporate level. This means that the corporation itself pays taxes on its profits before any distributions to shareholders, such as dividends, which are subsequently taxed again at the individual level. This double taxation is a significant aspect of C Corporations and contrasts with other types of business entities, such as S Corporations or partnerships, which are typically treated as pass-through entities for tax purposes.

In the context of corporate taxation, a C Corporation must file a corporate income tax return (Form 1120) and is subject to federal corporate income tax rates. This structure is fundamental to understanding how C Corporations operate financially and how their profits are taxed, impacting both their strategies regarding profit distribution and their overall tax liabilities.