Four main types of corporations exist in the United States:
- C corporations
- S corporations
- Limited Liability Companies (LLCs)
- Nonprofit Organizations
C Corporations
C corporation refers to any corporation that, under United States federal income tax law, is taxed separately from its owners . A C corporation is distinguished from an S corporation, which generally is not taxed separately. Most major companies (and many smaller companies) are treated as C corporations for U.S. federal income tax purposes. A C corporation has no limit on the number of shareholders, foreign or domestic. Any distribution from the earnings and profits of a C corporation is treated as a dividend for U.S. income tax purposes. Exceptions apply to treat certain distributions as made in exchange for stock rather than as dividends. Such exceptions include distributions in complete termination of a shareholder's interest and distributions in liquidation of the corporation.
Coca-Cola Company
Coca-Cola is a famous C corporation.
S Corporations
S corporations are merely corporations that elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. Like a C corporation, an S corporation is generally a corporation under the law of the state in which the entity is organized. For federal income tax purposes, however, taxation of S corporations resembles that of partnerships. Thus, income is taxed at the shareholder level and not at the corporate level. Payments to S shareholders by the corporation are distributed tax-free to the extent that the distributed earnings were not previously taxed. Also, certain corporate penalty taxes (e.g., accumulated earnings tax, personal holding company tax) and the alternative minimum tax do not apply to an S corporation. In order to make an election to be treated as an S corporation, the following requirements must be met:
- Must be an eligible entity (a domestic corporation, or a limited liability company which has elected to be taxed as a corporation).
- Must have only one class of stock.
- Must not have more than 100 shareholders.
Limited Liability Company (LLC)
An LLC is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation, and it is well-suited for companies with a single owner.
Nonprofit Organization
A nonprofit organization is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. While not-for-profit organizations are permitted to generate surplus revenues, they must be retained by the organization for its self-preservation, expansion, or plans.