Corporations – Its Definition, types and Many More

A corporation is a lawful entity that is separate and different from its owners. It is created by a group of people who share ownership representing by their holding of stock shares. Corporations may return a profit to their shareholders.

Corporations are the most common form of business organization in the United States. They are used by businesses of all sizes, from small startups to large multinational corporations.

Types of Corporation

There are many different types of corporations, but some of the most common include:

C Corporations

C corporations are the utmost common type of corporation. They are taxed separately from their owners, which means that the corporation pays taxes on its profits, and then the shareholders pay taxes on any dividends they receive from the corporation.

S Corporations

S corporations are a type of corporation that is taxed like a partnership. This means that the profits of the corporation pass through to the shareholders, who then pay taxes on their personal income tax returns.

Limited Liability Companies (LLCs)

LLCs are a hybrid business structure that combines the features of a corporation and a partnership. LLCs offer limited liability protection to their owners, and they can be tax as a corporation or as a partnership.

Nonprofit Corporations

Nonprofit corporations are corporations that are organize for charitable or educational purposes. They are not tax on their profits, and they are subject to different regulations than for-profit corporations.

Benefit Corporations

Benefit corporations are a type of for-profit corporation that is required to consider the impact of its decisions on society and the environment. These corporations are still taxed as C corporations, but they are subject to additional reporting requirements.

The type of corporation that is right for you will depend on your specific business needs and goals. If you are unsure which type of corporation is right for you, you should consult with an attorney or accountant.

Characteristics of a Corporation

• Legal personality: A corporation is a legal entity that is separate and distinct from its owners. This means that the corporation can own property, enter into contracts, and sue or be sued in its own name.
• Limited liability: Shareholders are not personally liable for the debts of the corporation. This means that if the corporation goes bankrupt, shareholders will not lose their personal assets.
• Continuous existence: A corporation exists independently of its owners. This means that if a shareholder dies or sells their shares, the corporation will continue to exist.
• Transferability of shares: Shares in a corporation can be bought and sold. This makes it easy for shareholders to buy or sell their interest in the corporation.
• Centralized management: A corporation is manage by a board of directors. The board of directors is responsible for setting the overall direction of the corporation and appointing the officers of the corporation.
• Double taxation: Corporations are tax on their profits, and then shareholders are tax on any dividends they receive from the corporation. This is known as double taxation.
• Shareholder voting: Shareholders have the right to vote on important corporate matters, such as the election of directors and the approval of significant corporate transactions.
• Corporate charter: A corporation is create by a document called a corporate charter. The corporate charter sets forth the basic structure and governance of the corporation.
• Bylaws: A corporation also has bylaws, which are internal rules that govern the day-to-day operations of the corporation.

These are just some of the critical characteristics of a corporation. There are many other factors that can affect the structure and operation of a corporation, such as the laws of the state in which the corporation is incorporate. If you are considering forming a corporation, you should consult with an attorney or accountant to discuss your specific needs.

How a Corporation Works in Practice

In practice, a corporation works by following the rules and procedures set forth in its corporate charter and bylaws. The board of directors meets regularly to set the corporation’s strategic direction and to oversee the corporation’s finances. The officers of the corporation are liable for carrying out the board’s directives and for managing the day-to-day operations of the corporation. The shareholders meet periodically to vote on important corporate matters.

The way a corporation works can be complex, but the basic principles are relatively simple. By following the rules and procedures set forth in its corporate charter and bylaws, a corporation can function effectively and achieve its business goals.

Some Additional Details About How a Corporation Works:

• The corporate charter and bylaws: The corporate charter and bylaws are the governing documents of a corporation. They set forth the basic structure and governance of the corporation, as well as the rights and responsibilities of the shareholders, the board of directors, and the officers.
• The Board of Directors: The board of directors is responsible for the overall management of the corporation. The board of directors sets the corporation’s strategic direction, appoints the officers of the corporation, and oversees the corporation’s finances.
• The officers: The officers of the corporation are responsible for the day-to-day operations of the corporation. The officers are appoint by the board of directors and typically include the CEO, CFO, COO, and other senior executives.
• The shareholders: The shareholders are the owners of the corporation. They own shares of stock in the corporation, which gives them a share of the profits and voting rights. Shareholders can vote on important corporate matters, such as the election of directors and the approval of significant corporate transactions.

Conclusion

The way a corporation works can vary depending on the size and structure of the corporation, but there are some general principles that apply to all corporations. The corporate charter and bylaws are the governing documents of a corporation. They set forth the basic structure and governance of the corporation, as well as the rights and duties of the shareholders, the board of directors, and the officers.

The board of directors is liable for the overall management of the corporation. The board of directors sets the corporation’s strategic direction, appoints the officers of the corporation, and oversees the corporation’s finances.