Which statement best describes a C-Corporation?

• A. A business that has a separate legal existence from its owners, with shareholders, a board of directors, and officers
• B. A pass-through entity for tax purposes
• C. A non-profit organization
• D. A sole proprietorship with unlimited liability

Answer: (A)

A C-Corporation is a business that exists separately from its owners, created as its own legal entity. It has shareholders who own the company, a board of directors who set broad policies, and officers who manage day-to-day operations. This structure provides limited liability to the owners, meaning they’re typically not personally responsible for the company’s debts. Taxwise, the corporation is taxed as a separate entity, and profits can be taxed again when distributed to shareholders as dividends (double taxation), which distinguishes it from pass-through entities. It’s also different from a nonprofit organization, and from a sole proprietorship where there is one owner with unlimited personal liability.