Taxes & Entities

C Corporations

A C corporation is a fully separate taxpayer. Its profits are taxed, and again when distributed (the double tax), yet it's the standard for every venture-backed startup and public company. It teaches that the "best" structure depends entirely on your plan for money, ownership, and exit.

  • Intermediate
  • 9 min total
  • 11 chapters

What decision this helps you make: Whether a C-corp's features (multiple stock classes, any shareholders, option grants, retained earnings) are needed for your plan, and whether that need outweighs the double tax.

What this topic is

The default corporate form: a fully separate taxpayer that pays corporate income tax, with distributed profits taxed again at the shareholder level (double taxation).

Why it matters

Despite the double tax it's mandatory for venture financing and public companies. That shows the right structure is decided by the plan (funding, ownership, exit), not by tax efficiency alone.

Who should learn it

Founders planning to raise venture capital or scale broadly, and anyone learning why one structure can be both tax-inefficient and required.

What you will understand

  • A C-corp is a separate taxpayer, hence the double tax
  • It enables multiple stock classes, any shareholders, and option pools
  • Retained earnings defer the second tax layer
  • The best structure depends on the plan, not tax efficiency alone

Prerequisites

Common misconception

"The double tax makes the C-corp the worst choice, so avoid it." For a small business distributing earnings to owners, often true. But for a venture-backed startup, the C-corp is mandatory. Its features (preferred stock, unlimited/any investors, broad option grants, retained earnings) are exactly what institutional investors require, and the double tax is deferred by reinvesting rather than distributing. The "worst" structure for one plan is the only structure for another.