Corporation

A corporation is an institution that is recognized as a separate legal entity with detached accountability.  It has its own rights, privileges, and liabilities distinct from those of its members or individual owners.  There are different types of corporations, most of which are used to conduct business.

Different types of corporations are as follows:

  • Publicly Held Corporation: The establishment most often referred by the word corporation is a publicly held corporation.  A publicly held corporation is a publicly traded corporation.  The shares of such corporations are traded on a public stock exchange (e.g., the New York Stock Exchange or NASDAQ in the United States).
  • Closely Held Corporation: A closely held corporation is a corporation that has only a small number of stockholders with no public market for its stock.
  • Limited Liability Company: Unlike a corporation, an LLC is a pass-through type of business.  Pass-through businesses are those in which the profits and losses of the business pass through to the owners.  In other words, the business income is considered as the owner’s income, and the owner pays the tax on his or her personal tax return.
  • C Corporation: A “C Corporation” is a business entity that can have an unlimited number of shareholders, which may include shareholders who are foreign citizens.  Shareholders are protected from the corporation’s liabilities.  The corporation is taxed on its profits, and shareholders are also taxed on the distributions they receive, such as profit sharing payments or dividends.
  • S Corporation: Unlike a “C Corporation”, an “S Corporation” must not have more than 100 shareholders and must have only one class of stock.  Spouses are automatically treated as a single shareholder. Shareholders must be U.S. citizens or residents, and must be natural persons, so corporate shareholders and partnerships are generally excluded. However, certain trusts, estates, and tax-exempt corporations, are permitted to be shareholders.  Profits and losses must be allocated to shareholders proportionately to each one’s interest in the business.
  • Professional Corporation: A professional corporation is a corporation consisting of professionals who are licensed to practice a particular profession such as accountants, lawyers and doctors.  These professionals can form a corporation and take advantage of the various benefits of the corporate structure such as limited liability of shareholders, continuity of life and centralized management.  However, shares in a professional corporation can only be transferred to other individuals licensed to practice in the same profession.
  • Non Profit Corporation: A nonprofit corporation is an organization formed for serving a purpose of public other than for accumulation of profits. These corporations enjoy tax-exempt status; however, specific requirements and limitations are imposed on their activities.   Non Profit corporations are generally those that serve a scientific, literary, education, artistic or charitable purpose that benefits the public.

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