Setting Up a Delaware C Corp
Setting up a Delaware C corp (corporation), under United States federal income tax law, refers to any corporation that is taxed separately from its owners.
- A C corporation is a taxation classification. A Delaware stock corporation or close corporation can be classified as a C corporation for income tax purposes.
- A C corporation is different from an S corporation because corporate income is taxed on the corporate income and not passed through to shareholders like a S corporation.
- Most major companies, public and private, are taxed as C corporations for U.S. federal income tax purposes.
- A C corporation files a corporate income tax return using IRS form 1120.
C Corporation vs. S Corporation
- Generally, a C corporation is automatically classed as a C corporation unless an election is made called a S corporation.
- If a corporation requests and is approved to be a S-corporation, then all income will "pass-through" to the shareholders and each shareholder will be taxed at their own individual, personal tax levels.
- For a S corporation to qualify for election, the corporation's shares must be held by citizen or resident individuals or qualifying trusts.
- A corporation may qualify as a C corporation regardless of the number of shareholders, foreign or domestic.
Setting Up a Delaware C Corporation
- It's easy to form a C corporation in Delaware. A certification of incorporation is prepared and submitted to the State of Delaware. Once filed and "stamped", your C corporation is recognized as a separate business entity.
- Delaware does not require any initial directors on the certificate of formation. There are no Delaware residency requirements for officers or directors.
C Corporation Income Tax Rates
- Any income, earnings or profits, from a C corporation is taxed as dividends for U.S. income tax purposes.
- As of 2010, the Internal Revenue Service (IRS) lists the following tax rate schedule for "most corporations", except "qualified personal service corporations" and certain other cases:
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