What is C2C (Corp-to-Corp)?
Definition: C2C (Corp-to-Corp) is a contracting arrangement where services are provided through the contractor's own incorporated business entity, creating a business-to-business relationship rather than an employer-employee relationship.
Also known as: Corp-to-Corp, Corp to Corp, Corporation to Corporation
Quick Summary
TL;DRC2C (Corp-to-Corp) is a contracting arrangement where a worker provides services through their own incorporated business entity (LLC or S-Corp) rather than as an individual. The client company contracts with the worker's corporation, not the person directly. This affects taxes, benefits, and pay rates.
Key Facts
Legal Structure
Business-to-business contract
Employment law
Tax Responsibility
Contractor pays all taxes
IRS requirements
Common In
IT, Consulting, Engineering
Industry usage
Benefits
Higher rates, tax advantages
Contractor experience
Why C2C Matters for Staffing Agencies
Staffing agencies frequently work with C2C contractors, especially in IT and consulting. Understanding C2C is essential for rate negotiations, compliance, and candidate conversations. Many candidates don't understand the difference between C2C and W2, leading to confusion about rates and take-home pay. Agencies must clearly explain the tradeoffs and ensure proper documentation for C2C arrangements.
Common Pain Points
- 1Candidates not understanding C2C tax obligations
- 2Rate negotiations complicated by different employment types
- 3Compliance risks with contractor classification
- 4Documentation requirements for C2C relationships
How C2C Arrangements Work
Understanding the C2C structure helps agencies and candidates make informed decisions.
- 1
Contractor Forms Corporation
The worker establishes an LLC, S-Corp, or other business entity. This is their 'corp' in corp-to-corp.
- 2
Agency Contracts with Corporation
The staffing agency or client signs a B2B services agreement with the contractor's corporation, not the individual.
- 3
Services Delivered
The contractor performs work. Invoices are submitted by their corporation to the agency or client.
- 4
Payment and Taxes
The corporation receives payment, handles its own taxes, insurance, and pays the contractor as an employee of their own corp.
Result
C2C provides flexibility and potential tax advantages but requires contractors to manage their own business administration.
C2C Deep Dive for Recruiters
C2C Rate Calculations
C2C rates are typically 10-15% higher than W2 rates to account for the contractor's additional costs: self-employment taxes (15.3%), health insurance, retirement contributions, liability insurance, and business overhead. A $60/hr W2 role might be $68-72/hr C2C. When converting rates, factor in the contractor's actual take-home after expenses.
C2C vs W2 vs 1099
W2 employees have taxes withheld and receive benefits from the employer. 1099 contractors are individuals with no withholding. C2C contractors operate through a corporation, adding a layer of liability protection and different tax treatment. C2C is preferred by many consultants because it allows business expense deductions and potential tax advantages through S-Corp structures.
Compliance Considerations
C2C arrangements must reflect genuine business relationships. The contractor's corporation should have multiple clients (or the realistic ability to), control how work is performed, and bear business risk. Misclassifying W2 employees as C2C to avoid payroll taxes is illegal and carries significant penalties. Document the business relationship properly.
Common Misconceptions
- C2C is just another name for 1099 work
- C2C contractors always earn more take-home pay
- Any contractor can do C2C without setting up a business
- C2C avoids all employment taxes
C2C vs W2 vs 1099 Comparison
| Factor | W2 Employee | 1099 Contractor | C2C Contractor |
|---|---|---|---|
| Tax Withholding | Employer withholds | None | None (corp handles) |
| Benefits | From employer | None | Self-provided |
| Liability Protection | Employer covered | Personal liability | Corporate protection |
| Typical Rate Premium | Baseline | +5-10% | +10-15% |
| Business Expenses | Limited deductions | Some deductions | Full business deductions |
Understanding different employment types
Related Terms
Frequently Asked Questions
Related Resources
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