A corporation is a legal entity, other than a natural person which often has similar rights in law as a person. This is referred to as corporate personhood and is seen by critics as a fundamental flaw in the nature of corporations. In civil law systems corporations are referred to as moral persons and may also go by the name SA (society anonymous) or something similar, depending on the language. In modern practice, corporation is often used more narrowly to mean commercial entities created within a governmental framework. However, churches, interest-groups (both can be formed as not-for-profit corporations or can exist as voluntary associations), cities and townships (often chartered as public corporations), among others, may also have historically lengthy corporate identities. =General=
Some jurisdictions do not allow the use of the word company alone to denote corporate status, since the word company may refer to a partnership or may merely be part of the business entity's name. Some of the magic words used to signify corporation status that can only be used with state sanction include: Limited (Ltd.), Unlimited, Incorporated (Inc.), Corporation (Corp.), S.A. (Société anonyme), GmbH (Gesellschaft mit beschränkter Haftung). Some jurisdictions require that one of a list of terms or abbreviations appear in the corporate name. Generally speaking if a corporate, be it domestically created or foreign (from another jurisdiction) it must be registered to conduct business in a state, such a registry will also designate the principal addresss of the corporation, i.e. where it may be contacted for legal process.
Sometimes called a fictional person, legal person or a moral person (as opposed to a natural person); in the United States this is known as the doctrine of corporate personhood. Under such a doctrine, obviously a legal fiction, a corporation enjoys many (or all) of the rights and obligations of individual citizens such as the ability to own property, sign binding contracts , pay taxes, have constitutional rights and otherwise participate in society. Typically a corporation is governed by a board of directors which has a fiduciary duty to look after the interests of the corporation. The corporate officers such as the CEO, president, treasurer and other titled offices manage the affairs of the corporation.
Kenneth Pomeranz, an economic historian, argues that the need to perform pseudo-governmental operations such as the waging of war was the reason this economic structure developed in Europe and not in China or the Middle East.
Historically, most U.S. states issued charters for fixed lengths of time (e.g. a manufacturing corporation might be chartered for forty years), and only by an act of the legislature. The theory behind a limited charter was that it forced corporations to remain accountable to government (i.e. the community) for the special privileges granted to them. Investors protested that it actually led to unhealthy amounts of political payoffs and graft. Most states now charter unlimited-term corporations for a small fee, and possibly a yearly tax.
Related topics: Preferred stock, Corporate governance, Bylaws, Delaware corporation, Commercial law, Stock certificates
=Corporate taxation=
The two types of corporations for taxation purposes are:
C-Corp - Most common form of corporation, the C-corporation has few ownership restrictions and must pay corporate taxes; all publicly traded corporations are C-corporations. C-corporations pay income taxes just as an individual does, and C-corporations do not receive a deduction on dividends they pay to stockholders. This leads to the so-called "double-taxation" of corporate profits: a given profit will be subject to income tax twice, once at the corporate level, as an item of income, and once at the stockholder level, as a dividend.
S-Corp - Commonly used by small business proprietors, the S-corporation pays no corporate taxes, but instead passes profits and losses directly to its owners (the stockholders) who declare such profits and losses as part of their personal income taxes). In this manner they are similar to partnerships, although there are some subtle differences in taxation. As a result, S-corporations are not subject to the "double-taxation" that C-corporations are. However, S-corporation treatment is not available to all corporations. An S-corporation must generally have no more than 75 stockholders, all of the stockholders must be natural persons (not other corporations or entities) who are U.S. residents, and the S-corporation can only issue a single class of stock.
=Other related types of business entities=
A partnership can have general partners and limited partners (also known as silent partners). General partners are liable for all of the debts and obligations of the partnership. Limited partners, on the other hand, are liable only for the amounts they have specifically agreed to contribute to the partnership pursuant to the partnership agreement.
A limited liability partnership (LLP) is a partnership composed entirely of limited partners without any general partner. In most U.S. jurisdictions, limited liability partnership are, for historical reasons, restricted to associations of professionals such as lawyers and doctors. However, this restriction is fairly meaningless since the same legal result can be achieved using the form of a limited liability company.
Many lawyers and businesspersons prefer the limited liability company form of taxation because of its extreme flexibility and favorable tax treatment.
=See also=
Legal status
Within the official framework, a corporation or in some jurisdictions a company, is a legal, artificial entity with or without shareholders, who may be humans, trusts or other corporations. When there are no stockholders this may be a non-stock corporation, a membership corporation or similar name — this second type of corporations are not-for-profit corporations. In either category, the corporation is a collective of individuals with a distinct legal status with special privileges that are not given to ordinary unincorporated businesses, voluntary associations or groups of individuals. Corporations are chartered by a state, and regulated by the laws enacted by that state. Its activities will generally be regulated by the law of the state in which the corporation operates, if different from the state in which it was formed.Benefits of forming a corporation
Two of the most salient features of incorporation are:
Origins
Early corporations of the commercial sort, such as the Dutch East India Company were formed under frameworks set up by governments to undertake tasks which were too risky or too expensive for individuals or the governments to embark upon.Non-profit organizations
In modern economic systems, the corporate form of governance is commonly used for a wide variety of business and non-profit activities. Though the laws governing these creatures of statute are often different the courts often interpret provisions of the law that apply to profit making enterprises in the same manner, or in a similar manner, when applying principles to non-profit organizations as the underlying structures between these two types of entity are often very similar.National features
United States
In the United States there are several corporate forms; what are generally called corporations are businesses run for profit that have been granted corporate charters by the States of the United States. The federal government of the United States usually does not grant corporate charters to businesses (exceptions include public corporations such as the Post Office and Amtrak). American corporations are typically chartered in Delaware, which charges no tax on activities outside the state and has courts experienced in business law. Corporations set up for privacy or asset protection are often chartered in Nevada, which allows setting them up with no record of who owns them.Canada
In Canada both the federal government and the provinces have corporate statutes, and thus a corporation may have a provincial or federal charter. Many older corporations in Canada were created by an Act of Parliament before the general corporation law was passed.In the United States
In the United States business corporations are taxed according to several different categories. The United States Internal Revenue Service classifies organizations as associations (taxable as corporations), partnerships (not limited to common-law partnerships) or trusts ("ordinary trusts"). [see 26 CFR §§301.7701-2 through 301.7701-4] Partnerships and limited liability partnerships
A partnership is a contractual agreement between individuals and/or corporations in which profits and losses are shared. It is similar to a sole proprietorship but it has more than one member, each called partners. A partnership is not considered a separate entity and the partners are all liable for the debts of each partner (if contracted to on behalf of the partnership). Usually a partnership will not survive the death of one of the partners (though it may be reorganized at that time).Limited liability company
The limited liability company (LLC) is similar to a partnership in that it provides a very flexible structure. A limited liability company has members, rather than partners, and is governed by an operating agreement, rather than a partnership agreement. Otherwise it is very similar to a partnership in that the members can contractually arrange in the operating agreement for the management and economic provisions that they wish.Business trusts
There is also a final type of business entity that can be used, though it is most often used as a vehicle for investment purposes, called a business trust. Only a few jurisdictions allow for the creation of business trusts, most notably Massachusetts; many mutual funds are organized as Massachusetts business trusts. In many jurisdictions it has become popular as a vehicle for investing in real estate, which are called real estate investment trusts or REITs (pronounced reets).Taxation of non-corporate entities
Since 1996, United States partnerships and limited liability companies have been able to elect whether to be treated as corporations or "flow-through" entities under the IRS' check the box regulations (see form 8832). A flow-through entity is not treated as a person for income tax purposes, instead its income and loss (and every other tax attribute) is divided up among its partners and reported by them to the IRS. There are some limits on an entity's ability to elect flow-through treatment, the most important of which is a publicly-traded company cannot elect flow-through treatment; as a practical matter this means that publicly traded corporations are subject to a more stringent tax regime than closely held companies.Quote