In a C corporation, shareholders (people who own the company) exchange money, property, or both for the corporation’s capital stock, issued either initially when the corporation is formed, or at different times during the year, according to the company’s laws and shareholder agreements. A C corporation may generally use the same deductions as a sole proprietorship to figure its taxable income. A corporation may also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate tax-paying entity.