A corporation is a business entity with legal rights similar to a person, providing protection to those involved. There are three types of corporations in the US: Close, C, and S. Incorporation offers legal and tax protection, and potentially infinite life for the business. Different states have different rates for incorporating.
In a general sense, a corporation is a business entity that is granted many of the same legal rights as a real person. Corporations can be formed by a single person or a group of people, known respectively as sole proprietorships or aggregated companies.
Corporations exist as virtual or fictitious persons, providing limited protection to the actual people involved in the company’s business. This disclaimer is one of the many benefits of incorporation and is a major attraction for small businesses to incorporate; especially those involved in highly controversial exchanges.
A corporation is incorporated in a specific nation, often within the bounds of a smaller subset of that nation, such as a state or province. The corporation is then governed by the incorporation laws in that state.
A company may issue shares, privately or publicly owned, or may be classified as a non-corporate company. When issuing shares, the company will generally be governed by its shareholders, either directly or indirectly. The most common model is a board of directors that makes all of the most important decisions for the company, in theory serving the best interests of individual shareholders.
There are three main types of companies in the United States: Close, C, and S.
Neighboring companies issue shares, but the amount of shareholders is very limited, usually less than thirty. Given the limited number of shareholders, normally all are involved in the decision-making process at board level. The transfer and sale of shares are also strictly controlled.
C corporations are the most common type of corporation in the United States. They allow you to issue theoretically unlimited amounts of shares and usually have a smaller board of directors that makes the decisions. C corporations pay both corporate and personal taxes, as shareholders pay taxes on their dividends.
S corporations are virtually identical to C corporations, except that they have a special tax status with the IRS. Instead of paying taxes at both levels, S corporations are only required to tax their dividends – the corporation itself does not need to pay taxes.
While many people in the United States choose to incorporate in their state — especially small businesses — some states have corporate charters that are particularly beneficial to certain types of businesses. Nevada, for example, does not require ownership records attaching names, making it ideal for companies interested in protecting the private identities of their owners.
In recent years, a number of books and websites have sprung up to help small businesses integrate. There are two main benefits for most small businesses. The first is substantial legal and tax protection in the event of litigation or bankruptcy. The second is potentially uninterrupted, essentially infinite life for the business. This is in contrast to a sole proprietorship, which could experience problems and complications if the owner dies, while a corporation allows the transition without disruption to the business.
Different states have different rates for incorporating, but most are extremely affordable. For anything more complicated than just setting up a sole proprietorship, an attorney is a necessity; and even for the most basic business structure, an attorney is recommended.
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