Which of the following are C corporations NOT able to do?

• A. Exist as a separate legal entity from their owners
• B. Avoid double taxation on corporate earnings
• C. Issue shares of stock to raise capital
• D. Enter into contracts in the corporation's name

Answer: (B)

Verified step by step guidance

1. Understand the concept of a C corporation: A C corporation is a legal entity that is separate from its owners (shareholders). It is subject to corporate income tax and can engage in business activities, enter contracts, and issue stock.
2. Review the characteristics of C corporations: They can exist as separate legal entities, issue shares of stock to raise capital, and enter into contracts in the corporation's name. These are fundamental features of C corporations.
3. Clarify the concept of double taxation: C corporations are subject to double taxation, meaning corporate earnings are taxed at the corporate level, and dividends distributed to shareholders are taxed again at the individual level. This is a key disadvantage of C corporations.
4. Identify the limitation: C corporations cannot avoid double taxation on corporate earnings. This is inherent to their structure and distinguishes them from other business entities like S corporations or partnerships.
5. Conclude the analysis: Based on the characteristics and limitations of C corporations, the correct answer is that they are NOT able to avoid double taxation on corporate earnings.