Definition of A Corporation

Corporation What Is It ? / Definition

A business may incorporate without an attorney, but legal advice is highly recommended. The corporate structure is usually the most complex and more costly to organize than the other two business formations. Control depends on stock ownership. Persons with the largest stock ownership, not the total number of shareholders, control the corporation. With control of stock shares or 51 percent of stock, a person or group is able to make policy decisions. Control is exercised through regular board of directors' meetings and annual stockholders' meetings. Records must be kept to document decisions made by the board of directors. Small, closely held corporations can operate more informally, but record-keeping cannot be eliminated entirely. Officers of a corporation can be liable to stockholders for improper actions. Liability is generally limited to stock ownership, except where fraud is involved. You may want to incorporate as a "C" or "S" corporation.

Corporation Definition Of

Corporation ó This is a legal entity separate from the owners of the
business. There are significant formalities that must be observed to properly
operate a corporation. The corporation provides a wall of liability protection
between the business and the owners. It has the ability to raise capital by
issuing stock. While the limited liability enjoyed by shareholders may appear
attractive, most creditors will probably require a personal guarantee as
collateral. The corporation must pay its own taxes in addition to the owners,
and owners who work in the business are considered employees. A corporation
may become an ìSî Corporation through application to the IRS. This
will eliminate the double taxation of a corporation, but may result in the loss
of some tax deductions and reduce flexibility on the handling of business
losses. It does NOT eliminate employer responsibilities for corporate officers.

What Is A Corporation?

A corporation is a separate legal entity that exists under the authority granted by state law. A corporation has substantially all of the legal rights of an individual and is responsible for its own debts .It must also file income tax returns and pay taxes on income it derives from its operations. Typically, the owners or shareholders of a corporation are protected from the liabilities of the business. However, when a corporation is small, creditors often require personal guarantees of the principal owners before extending credit. The legal protection afforded the owners of a corporation can far outweigh the additional expense of starting and administering a corporation.