What is a disadvantage specifically associated with C corporations?

C corporations face a specific disadvantage known as double taxation on earnings. This means that the corporation itself pays taxes on its profits at the corporate tax rate. After this, when the corporation distributes dividends to its shareholders, those distributions are taxed again at the individual tax rate. This two-tier taxation can be a significant financial burden for both the corporation and its shareholders, potentially discouraging investment and impacting overall returns.

In contrast, other characteristics of a C corporation, such as unlimited life or a structured organization, do not inherently carry the same disadvantages. Unlimited life allows the corporation to continue existing beyond the life of its founders, and the complex nature of its organization, while perhaps cumbersome, reflects its ability to raise capital through shares and provides limited liability to its owners. Limited resources for capital is not a disadvantage typically associated with C corporations, as they often have greater access to funding through the issuance of stock. Therefore, double taxation is a primary drawback that uniquely characterizes C corporations.