The Structure of Corporations
Information sourced from "Corporations" 10.3
Basic Features
A corporation is a business owned by a group of people and authorized by the state in which it is located to act as though it were a single person, separate from its owners. Corporations take up the largest portion of the business landscape and because of this they hold a very significant influence over our country and others. Corporate sales of goods and services are more than 20 times greater than sales from proprietorship's, and more than six times greater than sales from partnerships in the United States. Corporations are also seen among small businesses because of benefits they provide such as state backing and the stability created by an efficient management and regulations. A corporation is created by the laws of the state. They can make contracts, borrow money, own property, and sue or be sued in their own name.
The Formation of Corporations
Stockholders
A corporation can be owned by thousands of people at one time. These people are known as stockholders and by purchasing a share they obtain partial ownership of the business. All stockholders have a number of basic rights; they can transfer ownership to others, vote for members of the board, receive dividends, buy new shares if available, and share in the company's net proceeds. A stockholder does not have the same financial responsibility as a partner but if the corporation fails they can lose only the money invested.
Board of Directors
The Board of directors is the ruling body of the corporation that is voted into power by stockholders. They have the power and responsibilities to develop plans and policies to guide the corporation as well as appoint officers to carry out issues pertaining to the company. Boards generally consist of 10 to 25 directors. If the company is doing well the board deals with policy issues and reviews the progress of the company. If profits fall the board takes up an active role in the operational management of the company.
Officers
Officers of a corporation are the top executives who are hired and appointed by the board to manage the corporation. They generally consist of President, a secretary, and a treasurer. Most corporations appoint vice presidents in charge of areas such as marketing, finance, and manufacturing. Corporate titles or business titles are given to the officials to distinguish what duties and responsibilities they have in the organization.
The Benefits and Detriments of a Corporation
Sources of Capital: Corporations can obtain money from several sources, including stockholders, but people seem to more willingly invest into proprietorship's and partnerships rather than face the tight regulations of corporations.
Permanency of Existence: Corporations are more permanent than proprietorship's and partnerships. They can continue to operate indefinitely with little changes even when faced a withdrawal of a stockholder or a change in managers.
Taxation: Corporations are usually subject to more taxes than are imposed on the proprietorship's and partnerships. Some of these extra taxes come from filing fees, organization tax, state tax, federal income tax, and stock tax.