US RESIDENT

 
 

Learn about Corporations

The corporation is the traditional business for growth and large-scale companies. It is also the most rigid and formal business organization, with many rules and annual rituals to follow.

Shareholders-directors-officers-250x480

corporation is a legal entity owned by shareholders but completely separate from them. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts incurred by the business. It also means that shareholders have no direct rights to the money or any other assets of the corporation. If the directors choose to give the shareholders dividends, that’s great. Otherwise, shareholders get nothing from the corporation until they sell their shares.

The shareholders elect one or more people to serve on the board of directors. In turn, the Board of Directors exists to govern the corporation and set its policies and priorities, approve major business decisions, and appoint officers.  The officers hold titles such as president, secretary and treasurer, and are the only ones with authority to sign contracts and to run the corporation on a day to day basis.

Corporations are more structured than other business types, in that there are a number of formalities that must be followed. Companies that are positioned for growth and seeking outside investment generally prefer to use corporations. In order to attract this outside investment, corporations often end up with more costly administrative fees and complex tax and legal requirements. For a small business looking for liability protection without the formalities of incorporation, using a limited liability companies (LLCs) instead is often the better choice.
Corporations offer the ability to sell ownership shares in the business through stock offerings. “Going public” through an initial public offering (IPO) is a major selling point in attracting investment capital and high quality employees. Corporations also have the ability to issue stock options as a way to recruit and reward management, staff and investors.For any state (outside of the state where they are incorporated) where the corporation is doing business, the corporation will likely have to register to do business with the Secretary of State and pay taxes in that state. For example, a corporation incorporated in Delaware but doing business in New York will have to file an Application for Authority to do business in New York, register with the NYS Department of Taxation and Finance, and collect New York State sales tax for any sales to consumers in the state.