A C corporation is a business structure that’s owned by shareholders. A common alternative to the S corp, small businesses usually don’t pick C corps as their first choice. This is because they’re generally more complicated, are subject to double taxation, and typically have high fees. However, for many companies, the C corp can be an appealing option because it allows people to take stock in exchange for an ownership stake.
If you provide more than small services for a C corp, you’re considered an employee. Therefore, you should receive reasonable compensation for your work, which is subject to payroll taxes. What is reasonable, you ask? The IRS has a bunch of rules it needs to follow, so chat with a tax advisor to ensure your compensation is in line with all federal requirements. Also remember your reasonable compensation must be paid before making non-wage distributions.Updated September 26, 2017
This article provides general information and shouldn’t be construed as tax, benefits, legal, or HR advice. Rules and regulations may change over time and may vary by location. So, please consult an appropriately certified expert (such as a lawyer, CPA, tax advisor, licensed broker, or HR expert) for advice specific to your circumstances.