Which characteristic describes a C Corporation?

• A. Basic corporate form with no limit to shareholders.
• B. Taxed as a pass-through entity like a partnership.
• C. It is a nonprofit entity.
• D. It cannot issue stock.

Answer: (A)

The main idea here is that a C corporation is the standard corporate form that exists as a separate legal entity from its owners, and it can attract capital by issuing stock to a virtually unlimited number of shareholders. This unlimited owner base is what makes it distinct from other structures that limit who can own shares, such as certain pass-through entities or nonprofits. In practice, large, for-profit companies like many well-known multinationals operate as C corporations, issuing stock to countless investors and raising capital from a broad base.

Also important is how C corporations are taxed: they are taxed as a separate entity at corporate tax rates, and when profits are distributed as dividends, those dividends are taxed again at the shareholder level, leading to the well-known double taxation. This contrasts with pass-through entities (like partnerships) where profits pass directly to owners and are taxed only once at their individual rates.

So the statement that best describes a C corporation is that it is the basic corporate form with no limit to shareholders. The other descriptions don’t fit: taxation as a pass-through entity is not how C corporations are taxed, nonprofits are a separate category with different tax treatment, and a typical corporation can issue stock.