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Types of Corporation

Posted by on Oct 18, 2016 in Business | 0 comments

A Corporation is a type or business entity wherein a group of shareholders assumes an existence that is independent of the individual shareholders, making this group’s powers and liabilities, therefore, distinct from those of its members.

A corporation limits the liability of shareholders; thus, even if is held liable for damages in a civil suit, the most shareholders can lose would be their investment in the stock. Personal properties and assets of shareholder are not on the line for corporate liabilities.

A corporation has four main types: C Corporation; S Corporation; Limited Liability Company (LLC); and, Nonprofit Organization.

  • C Corporation. Under the U.S. federal income tax law, a C corporation is a type of corporate business entity that is taxed separately from its owners. The number of shareholders in a C corporation, whether foreign or domestic, is never limited.
  • S Corporation. An S corporation is a special type of corporate business format that was formed through an IRS tax election. Under the S corporation set up, company income, deductions, and tax credits flow through to shareholder, thus, income is taxed at the level of the shareholder instead of at the corporate level. While an S corporation limits the financial liability of a shareholder, this may not apply in litigations due to workplace incident.
  • Limited Liability Company (LLC). An LLC combines the elements of a partnership and a corporation. While the company’s existence is separate from its members, allowing it to exist even if one or more members withdraw, all business profits and losses are reported on members’ personal tax return. LLC members also enjoy limited liability in the event that the company incurs huge debts or goes bankrupt. This means that members’ properties and assets of are protected from being taken by creditors in payment of company debts.
  • Nonprofit Organization. This type of corporate business entity uses surplus revenues in achieving its goals rather than distributing them as profit or dividends.

As the firm, Russo, Russo & Slania, P.C., explains in the website, establishing a new company is an exciting move, however all decisions can have a substantial impact on the future of the business. From a legal standpoint, there are a range of different choices that must be made which can profoundly influence the course of a company’s development and progress. Advice from a qualified legal professional can prove invaluable, especially for entrepreneurs.

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