This requirement does not apply to farming businesses.If the corporation has not been in existence for 3 years, then the average must be computed for the time that it has been in existence.Note, however, that the tax rates jump around as income increases.For instance, the top tax rate of 39% only applies to the amount over 0,000 but less than 5,000 A disadvantage to C corporations is that they do not benefit from the favorable long-term capital gains tax rate.Shareholders who work in the corporation, as is often the case in closely held corporations, are treated as employees of the corporation under tax law — they are not self-employed.
Some states, such as Delaware, Nevada, and Wyoming assess very low or no taxes on corporations within their states.
The corporation is distinct from the shareholders, and the liability of the shareholders is limited to their investment in the corporation.
Their personal assets are not at risk, except in certain specialized cases where the shareholders form a corporation to commit fraud, in which case, state law allows a "piercing of the corporate veil" to hold the shareholders accountable. When the corporation has just 1 stockholder, that person must serve as the director and president, as well as secretary and treasurer.
Corporation franchise taxes, and the professional help, especially in the form of legal and accounting services, needed to set up and operate the C corporation increases the cost of doing business.
Incorporated businesses are 1 incorporated as a C corporation.
The following discussion covers closely held C corporations with few shareholders, since the taxation of such corporations is simpler.