It is an often overlooked question among investors, small business owners and franchisors; what makes a business a corporation? Often, the confusion is about which entity to use, rather than asking what it is not. However, there is a difference between the two. A corporation is a separate legal entity from its shareholders or owners, while a partnership is only one entity among many.
For the sake of simplicity, we’ll assume that we are talking about a family-owned business. We will use the word ” Corporation” to describe any privately held company with a registered agent, office and officers. This includes any government entity, including schools, hospitals, churches, franchises, partnerships, and even candidates for elective offices. In the past, the term ” Corporation” was also used for privately held for-profit companies such as colleges, shops, charities and even the armed forces. Nowadays, the use of the word has become so broad that it includes any privately held company, regardless of its size, products and services offered and its structure.
It is true that what makes a business a corporation can vary from jurisdiction to jurisdiction. While a United States Citizen is not required to register her corporation with the SEC, doing so is strongly advised because this is the most uniform method of establishing the legal identity of the company and helps avoid double taxation. This information is available from the IRS website and also on most state corporate filing websites.
Under common law, a corporation was created by a document known as a “power of attorney.” This document gave the members of the corporation the right to act as if they were members of the United States government. They enjoyed the same rights as other individuals, including the right to sue and petition the court for redress of wrongs. Because of the nature of these powers of attorney, many frauds and fraudulent activities were able to go on for years while criminals went free. Today, you can protect your business assets by protecting your own life and your own health.
For-profit corporations are usually separated into two different types: those that are publicly held and those that are not. A publicly held corporation is one in which stock ownership is limited to an ownership group. There is only one class of stock and it is common stock. Limited liability is another term commonly used to describe what makes a business a corporation: the use of various forms of “pass-through” taxation where income is taxed only once, as opposed to once only.
The first step in what makes a business a corporation is the formation of the company. From there, various business aspects can be further defined and brought together, until a complete corporation is formed. The next step is the naming of the company. Once this is complete, all of the company’s debts and assets are listed and the corporation becomes a legal entity unto itself.
As previously stated, what makes a business a corporation is the use of various types of taxation. This is done through the method of “pass-through” taxation in which the profits from a company’s work are not taxed when they are received, but only when they are disbursed. This is in addition to corporate taxes, which are generally based on an entity’s gross revenue and are usually exempt from Federal and State taxes. These exemptions vary from state to state, so you will have to do some research to find out what the applicable tax rate is in your area.
It is important to understand what makes a business a corporation before incorporating. The first step in becoming a Corporation is to file the appropriate forms with your county clerk. The next step is to pay the fees required by your county clerk, and you will be able to officially open your corporation. Then you will be able to handle all of the tasks that go along with running a business and profitably running it.