Corporation

A "C Corporation" refers to the standard, state-formed corporation. The incorporator(s) must file the Articles of Incorporation and pay the appropriate state fees to the governing office, usually the Secretary of State.

A. Corporate Shareholder Protection

A properly formed and operated Corporation assumes a separate and distinct tax life from it's shareholders. A Corporation pays taxes on it's own corporate profits and files it's own corporate tax forms each year (IRS Form 1120).

B. Corporation Management

A Corporation is managed and controlled by the board of directors who are elected by the shareholders of the Corporation. The directors of the Corporation generally make policy regarding the Corporation but do not individually represent the Corporation in dealing with persons. Dealings with third persons are conducted through officers and employees of the Corporation whom have the authority delegated to them by the directors of the Corporation.

C. Corporate Shareholders

A Corporation is owned by it's shareholders.

D. Board of Directors

The Board of Directors is responsible for the day to day management and control of the Corporation. However, there are certain instances in which the shareholders are required to approve the actions of the Board of Directors. These instances include amendments to the Articles of Incorporation, sale of corporate assets, the merger or dissolution of the corporation, etc...

E. Corporate Officers

Corporate Officers are elected by the Board of Directors and are responsible for conducting day-to-day operational activities for the Corporation. Officers usually consist of the president, vice-president, secretary and treasurer.

F. Director & Shareholder Requirements

Most states allow one or more persons to form and operate a Corporation. Some states require that the number of persons required to manage a corporation be at least equal to the number of shareholders. For example, there must be two directors if there are two shareholders.

G. Shareholder Liability for Corporate Debt

Nonconformance to corporate requirements may result in the shareholders being held personally responsible for the corporate debt. If an under-capitalized Corporation is formed, funds are committed to officers and directors, stock is never issued, meetings are never held, or other nonconformities to state requirements, a court or the IRS may "pierce the corporate veil" and hold the shareholders personally liable for debts of the Corporation.

H. Double Taxation

Corporations are taxed on their own profits. Any profits paid out in the form of dividends are taxed again to the receipient as dividend income at the individual shareholder's rate. However, most small Corporations rarely ever pay dividends. Owner-employee salaries and fringe benefits are tax deductible to Corporations. Therefore, the result is that the employee-owners end up paying income taxes on the business income and double taxation rarely occurs.

I. S-Corporation Election

Since each business has specific requirements, the election to become an "S" Corporation may or may not be advantageous to your specific situation. Consult your accountant who knows the details of your business and the laws by which it is governed to find out which type of Corporation, "C" Corporation or "S" Corporation, is the best for you.

J. Duration

A Corporation is capable of continuing indefinetely since it is a separate entity from it's shareholders or owners. Death or incapacity of it's shareholders, officers, or directors or by transfer of stock from one person to another does not affect it's existence.

K. Constitutional Corporate Protection

A Corporation may exercise some of the constitutional protections granted to natural persons.

1. Right to Due Process and Equal Protection

Under the Fourteenth and Fifteenth Amendments to the U.S. Constitution, Corporations enjoy

the right to equal and due process of the law.

2. Freedom of Speech

Corporations have the right to express themselves on matters of public importance when those

issues "materially affect" corporate business.

3. Right to Counsel

Corporations can commit criminal activities which can result in fines and penalties that can be

harmful to stockholders, directors, officers and other persons. Corporations cannot be im-

prisoned. A corporate criminal defendant has a Sixth Amendment to a Right to Counsel. But,

because it faces no risk of imprisonment, it has no right to appointed counsel if it cannot

afford it's own counsel.

CorpWorld, Inc. cannot provide Legal Advice. CorpWorld is only a document filing service.