Corporations

Basic structure of a corporation.

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. A corporation, in a sense, is an artificial person created by the laws of the state. Any act performed for the corporation by an authorized person, such as an employee, is done in the name of the business.

How a corporation is formed and organized.

There is a series of management decisions had to be made about how the corporation would be organized. Then the proper legal forms had to be prepared and sent to the state office that handled such matters. Lastly, the state would review the incorporation papers and issue a charter if it approved. The group must get a charter, a charter is the official document through which a state grants the power to operate as a corporation.

Important roles within a corporation:

Stockholders- Stock holder is a person who buys one share of the corporation. There basic rights are : transfer ownership to others, vote on special matters, receive dividends ( dividends are profits that are distributed to stock holders on a per-share basis) buy new shares of stock, share in the net proceeds (cash received from the sale of all assets less the payment of all debts). Being a stockholder, there is no liability beyond the extent of the stockholder's ownership.


The board of directors - The board of directors is the ruling body of the corporation. Their responsibilities to develop plans and policies to guide the corporation as well as appoint officers to carry out the plans. if the business is successful they have freedom to deal with policy issues and review the progress of the company; however, if their profits fall, the board other steps in and takes an active role in the operational management of the business.


The officers- The officers of a corporation are the top executives who are hired to manage the business. The board of directors appoint the officers. The officers of a small corporation consist of a president, a secretary, and a treasurer; larger corporations have vice presidents in charge of major areas, such as marketing, finance, and manufacturing.

open vs. closed corporations.

Tax

the corporation is usually subject to more taxes than are imposed on the proprietorship and the partnership. They are taxed on with a filing fee, which is payable on application for a charter; an organization tax, which is based on the amount of authorized capital stock; an annual state tax, based on the profits; and a federal income tax. Another disadvantage for corporations is that profits distributed to stockholders as dividends are taxed twice. The corporation pays taxes on its profits , then the shareholders pay taxes on the dividends they receive.