Entities
C-Corporation
Also known as C-Corp
A C-Corporation is a US company taxed separately from its owners. The corporation pays federal income tax on its profit at 21%, and shareholders pay tax again on dividends they receive. A C-Corporation can issue stock, which is why US venture investors require this structure.
In plain terms: The company type investors expect. It pays its own tax, and you pay again when money reaches you.
Why it matters
If you are raising venture capital, a Delaware C-Corp is not a preference but a market convention: US funds often have tax-exempt limited partners for whom pass-through income is a problem, and every standard financing document assumes a corporation. The cost is double taxation plus real corporate formalities.
Example
A startup earns $1m profit. The corporation pays 21% federal tax. When the remaining profit is distributed as dividends, shareholders pay tax on it again.
Common misunderstanding
Forming one 'just in case' you raise. Converting an LLC to a C-Corp later is routine; paying corporate tax for two years against a round that never came is not.
Read the full guideScaling and fundraisingRelated terms
Source: IRS — Forming a corporation. This is a definition, not tax or legal advice — verify against the primary source before acting.