Business & Marketing

Corporation

 

A conventional (C) Corporation is a business with a state-charter with authority to act and have liability separate from its owners.  It’s owned by stockholders who are not liable for the debts of the corporation beyond their investment. A corporation can choose to offer stock to outside or inside the company. [1]

Advantages of a Corporation: [1]

  • Limited Liability
  • Ability to raise more money for investment
  • Size
  • Perpetual Life
  • Ease of ownership change
  • Ease of attracting talented employees
  • Separation of ownership from Management

The disadvantage of a Corporation:[1]

  • Initial cost
  • Extensive paperwork
  • Double taxation
  • Two tax returns
  • Size
  • Difficult of termination
  • Possible conflict with stockholders and board of directors

A (S) Corporation is a unique government creation that looks like a corporation but is taxed like a sole proprietorship and partnership. This avoids double taxation. In order to qualify, a company must: [1]

  1. Have no more than 100 shareholders
  2. Have shareholders that are individual or estates, and who are citizens or permanent residents of the United States
  3. Have only one class of stock
  4. Derive no more that 25 percent on income from passive sources

Taxation
In many countries corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate. Such a system is sometimes referred to as “double taxation”, because any profits distributed to shareholders will eventually be taxed twice.The corporate tax rate in the United States is 35%, the highest in the world.

Financial disclosure
In many jurisdictions, corporations whose shareholders benefit from limited liability are required to publish annual financial statements and other data, so that creditors who do business with the corporation are able to assess the creditworthiness of the corporation and cannot enforce claims against shareholders.

 

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