What is the main difference between C and S corporations?

The primary distinction between C and S corporations lies in how they are taxed. In the case of an S corporation, profits and losses are passed through directly to the shareholders and are reported on their individual tax returns, avoiding the double taxation that is typically seen with C corporations. C corporations are taxed at the corporate level on their earnings, and then shareholders are taxed again on the dividends they receive. This makes option A the correct answer, as it accurately reflects the tax treatment difference between the two types of corporations.

Other options, while addressing certain attributes of C and S corporations, do not accurately convey the main difference in taxation. For instance, stating that only C corporations can have shareholders is misleading; both types of corporations can have shareholders, but their structures and limitations differ significantly. Additionally, the claim that S corporations can have unlimited shareholders is incorrect, as S corporations are limited to 100 shareholders, which impacts their ability to raise capital compared to C corporations that can have an unlimited number of shareholders. Lastly, the assertion that C corporations are subject to fewer regulations does not address the fundamental, crucial difference regarding taxation and does not encapsulate the nuances of corporate governance under both structures.