Corporation
- Corporation: A Corporation is an artificial legal entity which, while made up of a number of people or other legal entities, has a separate legal identity from them. As a legal entity the corporation receives legal rights and duties. Five rights always exist for a corporation: the ability to sue and be sued (this gives the corporation access to the courts); the right to a common treasury (this gives the right to hold assets separate from the assets of its members); the right to hire agents (this gives the corporation the right to hire employees); the right to a common seal (this gives the corporation the right to sign contracts); and the right to make by-laws (this gives the corporation the right to govern its internal affairs). Generally, corporations are owned by Shareholders and are managed by Directors and Officers. The Officers usually are charged with the duty of running the day to day business of the corporation.
- “C” Corporation: This entity is subject to “double taxation” on company earnings. Most major companies and many small ones are treated as “C” Corporations for Federal Income Tax purposes.
- “S” Corporation: Unlike a regular “C” Corporation, an “S” corporation generally pays no corporate income taxes on its profits. Instead, the shareholders in the “S” corporation pay income taxes on their proportionate shares, called distributive shares, of the “S” corporation’s profits. Shareholders must report the income (and pay a related tax, if any) regardless of whether the shareholders receive distributions from the S corporation. This requires a valid election and filing with the I.R.S.
- Other Corporations: Among other types of corporations, there are “Professional Corporations,” “Not-For-Profit Corporations” and “Municipal Corporations.”