C-Corporation
A C-Corporation is a U.S. corporation with separate legal personality, taxed separately from its shareholders at the federal rate of 21 percent since the Tax Cuts and Jobs Act of 2017, and able to issue multiple classes of stock.
Definition
The C-Corporation, or C-Corp, is the reference corporate form under U.S. law, governed at the state level (notably by the Delaware General Corporation Law (DGCL) for Delaware corporations). It is subject to federal corporate income tax at a flat 21 percent rate since 1 January 2018, plus any applicable state income tax. Its shareholders are taxed a second time on dividends received, which is the classic double taxation of the C-Corp regime. A C-Corp may issue common and preferred stock, accommodate an unlimited number of shareholders including non-residents and entities, and raise capital through convertibles, SAFEs and preferred stock.
In plain English
If you want to raise from Y Combinator, Sequoia or any U.S. venture capital firm, you need to be a Delaware C-Corp. U.S. funds will not invest in an LLC or in a French SAS directly: their limited partners prohibit investments in fiscally transparent or foreign structures. The C-Corp allows you to issue Preferred Stock with a liquidation preference, grant stock options to employees through an Equity Incentive Plan, and build a cap table that any U.S. investor immediately understands. The trade-off: double taxation (21 percent federal on profits, then tax on dividends) and strict corporate formalities (board of directors, annual meeting, minutes, bylaws).
RWM transatlantic case study
A French startup raising 2 to 5 million dollars in a U.S. seed round typically performs a flip: the French SAS becomes a subsidiary of a newly formed Delaware C-Corp, incorporated before the transaction through a share exchange. This structure relies on the Delaware General Corporation Law, Title 8 of the Delaware Code, and on the French side it triggers a tax deferral if it qualifies as an apport-cession governed by article 150-0 B ter of the French Tax Code (CGI). The Delaware C-Corp issues Common Stock to the founders (typically 10 million shares at 0.0001 dollar) and Preferred Stock to the investors. Formation costs are low (around 500 dollars Delaware franchise tax minimum plus filing fees), but the annual franchise tax can reach several thousand dollars depending on the calculation method. We often arbitrate between the Authorized Shares Method and the Assumed Par Value Capital Method to optimize this annual cost.
Points to watch
- Double taxation: 21 percent federal plus state tax plus tax on dividends at the shareholder level.
- Section 83(b) election to be filed within 30 days of the founder grant, otherwise the IRS taxes vesting at fair market value.
- Qualified Small Business Stock (QSBS) under section 1202 IRC: potential exclusion of up to 10 million dollars of capital gain if held for 5 years.
- Annual Delaware franchise tax due 1 March, plus federal and state annual reports.
- Any France-to-U.S. flip must be structured carefully on both sides to avoid double taxation friction.