Introduction

Corporations are one of the most common forms of business organization in the United States. A corporation is a separate legal entity distinct from its owners, known as shareholders. Because of this separation, the corporation can own property, enter into contracts, incur liabilities, and conduct business in its own name. This structure provides limited liability protection, which generally shields shareholders’ personal assets from the corporation’s debts and legal obligations.

For federal income tax purposes, corporations are primarily governed by Subchapter C of the Internal Revenue Code (IRC §§ 301–385) and are commonly referred to as C corporations. Under Subchapter C, a corporation is treated as a separate taxable entity. It independently determines and reports its taxable income, allowable deductions, and tax credits, and it is responsible for paying federal income tax on its earnings.

This module examines corporate taxation by following the life cycle of a corporation. The discussion begins with the formation of the corporation, then moves to the calculation and reporting of corporate taxable income, and concludes with the tax treatment of corporate distributions and liquidations.