C-Corporation Definition
In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.
The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Corporations
What are the tax rates for C-Corps?
Unlike the income thresholds for individual taxes, the corporate income tax thresholds are not indexed for inflation. They only change when Congress passes corporate tax legislation.
After the corporate income tax is paid on the business income, any distributions made to stockholders are taxed again at the stockholders' tax rates as dividends. Income paid to shareholders as wages are also taxed on the shareholder's personal income tax return.
Form 1120 / instructions page 17
Corporate Business Tax Rates International Comparison by the Congressional Budget Office (Research)
What is meant by double taxation?
Many people have heard that corporate income is taxed twice: once to the corporation itself and then a second time when earnings are paid out to the corporation's owners (shareholders). This is true only for earnings paid out to shareholders in the form of dividends -- that is, profits paid by the corporation to its shareholders in return for their investment in the company.
What is the dividend received deduction?
Pub 542 page 11 Dividends-Received Deduction
Can a business loss from a C-Corp be taken on a personal return?
No C-Corp is not a pass through entity. Shareholders in a C Corporation also can't deduct any corporate losses.
2/20- Net Operating Loss Pub 536
Net Operating Loss Defined -
A period in which a company's allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period.
The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when they earn money, they also deserve some form of tax relief when they lose money.