What are the tax implications for a business structured as a C corporation?

A C corporation is a distinct legal entity that is subject to corporate income tax. This means that the corporation itself pays taxes on its earnings before any distribution of profits to shareholders. Once profits are distributed to shareholders in the form of dividends, those shareholders must then report this income and pay taxes on it as well. This phenomenon is often referred to as "double taxation" because the same income is taxed at both the corporate and individual levels.

The other options do not accurately reflect the tax structure of a C corporation. A claim that the corporation pays no taxes negates the fundamental characteristics of a C corporation's tax obligations. The notion that only shareholders pay taxes overlooks the corporation's responsibility to pay taxes on its earnings. Lastly, while businesses can receive various tax incentives or deductions, the statement regarding receiving tax benefits from the government does not accurately summarize the tax implications of a C corporation's earnings and their distribution to shareholders.