C Corp | Retirement Glossary

A C corporation (C corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. This designation is derived from the subchapter of the IRS under which it is taxed (and is named for being in subchapter “C” of the Internal Revenue code). C corps only issue W-2 income, which can be used for retirement plan purposes.

C corps are well-positioned to maximize the potential of 401(k) plans for both owners and employees alike. A C corp, like any employer, has the ability to integrate matching and profit-sharing features, which are tax-deductible, into their 401(k) plans.

When are C corp taxes due?

It’s important to be clear about the deadlines applicable to a C corp’s 401(k) plan. If an employer misses the deadline, it can lead to certain penalties. According to the IRS, a C corp can use either the calendar or fiscal tax year.

Calendar tax year

C corp taxes are due on April 15th but they can extend the deadline to October 15th as long as an extension is filed. What this means is that a C corp must deposit their annual employer contribution no later than April 15th (unless an extension is filed) in order to deduct the contribution on their annual tax return.

Fiscal tax year

C corps that use the fiscal tax year must file their corporate tax returns by the third month after the end of its tax year. The fiscal tax year ends June 30th. A C corp can file an extension to lengthen the deadline by six months.

Legal status of a C corp

A C corp is considered a separate legal entity from its owners. This separation has significant implications:

Liability: Shareholders are not personally liable for the debts and liabilities of the corporation. Their risk is limited to the amount they invested in the corporation’s stock.
Taxation: The corporation itself is taxed on its earnings. When profits are distributed to shareholders as dividends, those dividends are also taxed, resulting in double taxation.

C corp vs. S corp

C corps and S corps differ primarily in terms of taxation, ownership restrictions, and management structures. C corps generally offer more flexibility and tax advantages in terms of employer contributions and overall plan management.

Key differences	C corp	S corp
Taxation	Subject to corporate income tax on its profits, and any dividends distributed to shareholders are also taxed at the individual level, resulting in double taxation.	Generally not subject to corporate income tax; instead, profits and losses pass through to shareholders' personal tax returns, avoiding double taxation. A C corp’s profits are taxed at the corporate level and again at the shareholder level when distributed as dividends (compared to a S corp’s profits and losses, which pass through directly to the shareholders' personal tax returns and avoid corporate tax).
Ownership	No restrictions on the number or nationality of shareholders, allowing foreign individuals and entities to own shares.	Conversely, an S corp is limited to 100 shareholders, all of whom must be U.S. citizens or residents, including certain trusts and estates.
Management	A C corp typically has a more formal structure with a board of directors and corporate officers and must adhere to rigorous recordkeeping and reporting requirements.	While still requiring a board of directors and officers, an S corp often has less formal management requirements and generally faces fewer compliance and reporting obligations.

Article Reviewed By

Vicki Waun

Vicki Waun, QPA, QKC, QKA, CMFC, CRPS, CEBS, CPC, is a Senior Legal Product Analyst at Human Interest and has over 20 years experience with recordkeeping qualified plans, along with extensive experience in compliance testing. She earned her BSBA in Accounting from Old Dominion University and is a member of ASPPA.

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