Why C corporation matters to a first-time founder
Many US investors and employee share plans are designed around corporations, and the form can support several share classes and continuing ownership. The corporation pays its own federal income tax. Shareholders may then pay tax on dividends, creating potential double taxation. State law, state taxes and filing duties also matter.
Examples of C corporation
A Delaware corporation earns $200,000 of taxable profit and retains most of it to hire engineers. The corporation pays applicable corporate tax. If it later distributes $30,000 as dividends, shareholders may owe tax on those payments too. Salaries and dividends are treated differently, so the founders use US tax advice.
Common misunderstanding
“C corporation” describes US federal tax treatment, not a special incorporation document or a global company type. It differs from an eligible S corporation, whose income generally passes through to shareholders for federal tax. Limited liability is not absolute, and founders can still be responsible for guarantees or misconduct.
When to use it
Consider it when forming a US company for institutional investment, issuing different share classes or retaining profits for growth. Compare it with other available structures using US legal and tax advice, including the founders’ residence and state rules. A non-US founder should not assume a familiar local company works the same way.