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    Essay On Corporations

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    abdul razak
    A corporation is a legal entity formed with state approval that can enter into contracts, sue or be sued, and conduct business separate from its owners. It has a board of directors elected by shareholders to manage the company and appoint officers. The main advantage of a corporation is limited liability, meaning shareholders are shielded from personal liability for corporate debts. However, corporations face double taxation and must comply with formation and dissolution requirements. Different types of corporations like C corporations and S corporations offer varying tax treatment.

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    Essay On Corporations

    Uploaded by

    abdul razak
    482 views2 pages
    A corporation is a legal entity formed with state approval that can enter into contracts, sue or be sued, and conduct business separate from its owners. It has a board of directors elected by shareholders to manage the company and appoint officers. The main advantage of a corporation is limited liability, meaning shareholders are shielded from personal liability for corporate debts. However, corporations face double taxation and must comply with formation and dissolution requirements. Different types of corporations like C corporations and S corporations offer varying tax treatment.

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    Essay on Corporations

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    A corporation is a legal entity formed with state approval that can enter into contracts, sue or be sued, and conduct business separate from its owners. It has a board of directors elected by shareholders to manage the company and appoint officers. The main advantage of a corporation is limited liability, meaning shareholders are shielded from personal liability for corporate debts. However, corporations face double taxation and must comply with formation and dissolution requirements. Different types of corporations like C corporations and S corporations offer varying tax treatment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    482 views2 pages

    Essay On Corporations

    Uploaded by

    abdul razak
    A corporation is a legal entity formed with state approval that can enter into contracts, sue or be sued, and conduct business separate from its owners. It has a board of directors elected by shareholders to manage the company and appoint officers. The main advantage of a corporation is limited liability, meaning shareholders are shielded from personal liability for corporate debts. However, corporations face double taxation and must comply with formation and dissolution requirements. Different types of corporations like C corporations and S corporations offer varying tax treatment.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Essay on Corporations

    This paper will discuss the characteristics of a corporation and the


    advantages and disadvantages to the corporate form of doing business.

    Starting with a definition, a corporation is an organization formed with state


    governmental approval to act as an artificial person to carry on business (or other
    activities), which can sue or be sued, and (unless it is non-profit) can issue shares of
    stock to raise funds with which to start a business or increase its capital
    (TheFreeDictionary, 2008).
    Our Service Can Write a Custom Essay on Corporations for You!
    Corporations are often referred to as legal persons. Indeed, the analogy with
    a person is helpful in understanding the functioning of a corporation, since it can
    enter into contracts, sue and be sued, pay taxes separately from its owners, and do
    the other things necessary to conduct business (Harroch, 2006b, para. 1).
    The main advantage of a corporation (which naturally stems from its legal identity
    being separated from that of an incorporator or shareholder) is that its liability for
    damages or debts is limited to its assets, thus shareholders and employees are
    shielded from personal claims, unless their behavior related to the governance of
    the corporation is illegal.
    With regard to functioning of such a legal entity, shareholders of a corporation elect
    a board of directors. The board can pass bylaws and appoint executive officers and
    upper management. Registering a corporation in a certain country (referred to as
    incorporating) requires submitting Articles of Incorporation to the Secretary of
    State and informing the latter of the incorporators identity, the corporations
    purpose, and the amount of stock it will be authorized to issue. Shareholders and
    the board are mandated to hold annual meetings (TheFreeDictionary, 2008).
    While limited liability is the main advantage of the corporate form of doing business,
    there are other benefits, such as corporate tax treatment, attractiveness for
    investors, a possibility of share ownership by employees (which increases their
    commitment and allows recruiting talented workers), corporate benefit plans,
    deductibility of health insurance for employees, and transferability of shares.
    However, there are certain disadvantages of this form of doing business. Forming a
    corporation entail paying fees, such as a fee for filing Articles of Incorporation and a
    first-year franchise tax prepayment. Also, a corporation has to comply with a
    number of formalities to prevent its status from being revoked. Dissolving a
    corporation is the responsibility of its board, and this process might entail gathering

    corporate assets, paying creditors and outstanding claims, and distributing the
    remaining assets to shareholders (Harroch, 2006b, Dissolution). Dissolution can be
    both voluntary and involuntary.
    The main disadvantage of a corporation in the traditional sense is double taxation:
    besides paying corporate income taxes, any dividends to shareholders are taxed
    again at the applicable tax rate (Harroch, 2006a, Disadvantages of a C
    Corporation).
    Yet this can be avoided by forming an S corporation. There are two main forms of
    corporations: a C corporation and S corporation. S corporations have a status similar
    to Limited Liability Companies; [t]his status allows the taxation of the company to
    be similar to a partnership or sole proprietor as opposed to paying taxes based on a
    corporate tax structure (Zahorsky, 2008, What is an S Corporation?). In addition,
    first years losses can be offset against personal income of the owner.
    Therefore, corporations have their own advantages and disadvantages. In addition,
    two types of corporation also differ significantly in their attractiveness for
    businesspersons.

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