The three types of corporations are class C corporations, class S corporations and close corporations. Class C, or general, corporations are the most common and are allowed an unlimited number of shareholders. Additionally, the income of a C corporation faces double taxation. First, the corporation pays income tax, and then shareholders pay personal income tax on dividends distributed to them. A class S corporation has no more than 100 shareholders. S corporations avoid double taxation because no corporate income tax applies. Close corporations are not recognized by all states but generally are for companies with a small number of shareholders. They are usually operated by a few individuals and are given permission by states to operate more informally than general corporations.
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