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A C Corporation is the only business structure that is never a pass-through entity.

The difference between C corporations and all the others is that c corporations are completely separate C Corp tax entities. This means you don’t pay the business taxes – the corporation pays its own C Corp tax. You will only pay C Corp tax on any money you take out of the business as salary or dividends.

* C corporations are taxed twice

* Tax is paid at the corporate level first.

* Dividends are taxed at the shareholder level (maximum 15%)

The business owner has to file two forms with the IRS:

* One for your personal taxes, reporting your salary or dividends from the business.

* One for the business. This will be either Form 1120 or Form 1120-a, the short form.

C corporation can still be a good choice where profits are less than $75,000

For this to work your company must earn more than you need to put in your pocket.

Instead of paying 35% on the surplus income you can pay just 15% or 25% by keeping it in your corporation.

Corporations are also subject to three additional taxes:

* Accumulated earnings C Corp tax. If your C corporation holds onto too much of its profits it incurs an accumulated earnings tax of 15%. This doesn’t kick in until accumulated earnings exceed $250,000.

* Personal holding company tax. This targets C corps that earn most of their money from investments such as dividends. You don’t have to concern yourself with this if you have a normal business.

* Corporate alternative minimum tax. Very few small businesses have to worry about this.