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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.The following discussion covers closely held C corporations with few shareholders, since the taxation of such corporations is simpler.
However, if the corporation has few shareholders, many states eliminate many of these requirements.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.If the capital losses are not offset by capital gains within that time, then the remaining losses can never be deducted. Because the tax code has specific rules for capital losses, they cannot be combined with other income to increase net operating losses nor to reduce other income.The corporation can claim any refund for the carryback period by filing Form 1120X, Amended U. Capital losses cannot even be combined with other capital losses from other years.
Although C corporations are the most expensive entity to start, operate, and maintain, they do have many advantages.