In this session, we will be discussing what is a corporation essay, and also corporation definition, corporation meaning, types of corporations, advantages of a corporation, disadvantages of the corporation, corporation vs company, corporation pros and cons, corporation examples.
What is a corporation essay? Definition
Definition: Most of the businesses are created by a group of people, individuals, stockholders, or shareholders those types of businesses are called corporations, and also it has rights and liabilities separate from those of the individuals involved. So, let’s discuss what is the actual meaning of corporation.
The corporations are those types of businesses, which are legal entity those created by individuals, stockholders, or shareholders, with the purpose of operating for profit. The corporation can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. Some refer to it as a “legal person.”
Shareholders, board of directors, and officers, all are involved in the corporation’s business organization. The shareholders are those people who are investors and own the company. They purchased the stock and legally own the assets of the business. Since there are often thousands or millions of shareholders, they can’t run the business on a day-to-day basis.
In the session on what is a corporation essay, we will be also discussing the types of corporations.
The types of corporations can be dedicated by the following points.
- C Corporation
- S Corporation
- Non-Profit Corporation
A corporation can be created by a single shareholder or by multiple shareholders who come together to pursue a common goal. A corporate can be formed as a for-profit or a not-for-profit entity.
For-profit entities form the majority of corporations, and they are formed to generate revenues and provide a return to their shareholders, according to their percentage of ownership in the corporation.
Not-for-profit entities operate under the category of charitable organizations, which are dedicated to a particular social cause such as educational, religious, scientific, or research purposes. Rather than distribute revenues to shareholders, not-for-profit organizations use their revenues to further their objectives.
C Corporation is the most common form of incorporation among businesses and contains almost all of the attributes of a corporation. Owners receive profits and are taxed at the individual level, while the corporation itself is taxed as a business entity.
S Corporation is created in the same way as a C Corporation but is different in owner limitation and tax purposes. An S Corporation consists of up to 100 shareholders and is not taxed as separate – instead, the profits/losses are shouldered by the shareholders on their personal income tax returns.
Commonly used by charitable, educational, and religious organizations to operate without generating profits. A non-profit is exempt from taxation. Any contributions, donations, or revenue received are retained in the entity to spend on operations, expansion, or future plans.
How Do Corporations Work?
A corporation is required to name a board of directors before it can commence operations, and the members of the board of directors are elected by shareholders during the annual general meeting. Each shareholder is entitled to one vote per share, and they are not required to take part in the day-to-day running of the corporation. However, shareholders are eligible to be elected as members of the board of directors or executive officers of the corporation.
The board of directors comprises a group of individuals who are elected to represent shareholders. They are tasked with making decisions on major issues affecting the shareholders, and they also create policies to guide the management and daily operations of the corporation.
The elected members of the board of directors owe a duty of care to the shareholders, and they must act in the best interests of the shareholders and the corporation.
In the session on what is a corporation essay, we will be also discussing the advantages of a corporation.
The advantages of corporations can be dedicated to the following points.
Separate legal entity – Independent from its owners and considered a legal entity that may conduct business, own properties, enter into binding contracts, borrow money, sue and be sued, and pay taxes.
Unlimited life – Stockholders, shareholders, or members are the owners of a corporation, and it is managed by a board of directors. Their death or inability to perform their duties does not affect the continuity of this legal entity; only changes in the company’s charter will enable it to either be extended or liquidated.
Limited liability – Company owners are only liable for the amount they invested. Creditors and lenders have no claim to the owners’ personal assets for payments owed by the shareholders.
Easy transfer of ownership shares – Publicly held corporations do not require approval from other stockholders to sell the stocks or shares of individual owners. Stocks or shares can be easily traded in the market, regardless of their volume.
Competent management – Investors or owners may not directly handle day-to-day business operations. They vote for the board of directors who eventually hire a professional management team.
Source of capital – Corporations can source funds from selling stocks and issuing bonds.
In the session on what is a corporation essay, we will be also discussing the disadvantages of a corporation.
The disadvantages of corporations can be dedicated to the following points.
Incorporation costs – It is more costlier to go through the process of incorporation than to form a sole proprietorship or partnership.
Double taxation – Two taxes are remitted, from the corporate earnings and from payments of dividends to shareholders.
Documentation – Aside from incorporation documents, companies must file annual reports and tax returns, as well as maintain accounting records, licenses, and other important documents.
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