Briefly describe the type of corporation favored by most big business.

QUESTION

Briefly describe the type of corporation favored by most big business.

What will be an ideal response?

ANSWER

Answer: A C corporation can have any number of owners (shareholders), most of whom do not work for the company. The business faces two levels of taxation. Taxes are paid on profits at the corporate level, and then all or part of those profits are given to shareholders as dividends, which are taxed again as part of personal income. C corporations are state-chartered.
Explanation: A C corporation is a state-chartered entity that pays taxes and is legally distinct from its owners. It can have any number of owners (shareholders), most of whom don’t work for the company. At the corporate level, taxes are paid on profits; then, all or part of those profits are distributed to shareholders as dividends, which are taxed again as part of personal income. Shareholders risk losing the money they have invested in the corporation but do not have any liability that could force them to lose their house, car, or other personal possessions.