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This entity is separate from its members unlike a sole proprietorship, but is taxed similarly when it comes to deductions and taxable income. A C corporation earns income, incurs expenses, shows a profit or loss, and pays income tax. Profits remaining after taxes are paid and available for distribution to shareholders, usually in the form of dividends. However, as a taxpaying entity, unlike S corporations or partnerships where profits and losses flow directly through to the shareholders or partners without being taxed at the corporate level, in C corporations there is a double taxation effect. Profits are subject to taxation at the corporate level, and then even further in the individual level. 


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