{"id":1414,"date":"2017-01-09T19:42:38","date_gmt":"2017-01-09T19:42:38","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/montgomerycollege-masterybusinesslaw2\/?post_type=chapter&p=1414"},"modified":"2017-01-09T19:42:38","modified_gmt":"2017-01-09T19:42:38","slug":"corporations-2","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/montgomerycollege-masterybusinesslaw2\/chapter\/corporations-2\/","title":{"raw":"Corporations","rendered":"Corporations"},"content":{"raw":"
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Learning Objectives<\/h3>\n
  1. Explain how corporations are formed and how they operate.<\/li>\n \t
  2. Discuss the advantages and disadvantages of the corporate form of ownership.<\/li>\n<\/ol><\/div>\n\u00a0\n\n[caption id=\"attachment_917\" align=\"alignright\" width=\"300\"]\"Types<\/a> Types of US Businesses[\/caption]\n\nA corporation<\/span><\/span> (sometimes called a regular<\/em> or C-corporation) differs from a sole proprietorship and a partnership because it\u2019s a legal entity that is entirely separate from the parties who own it. It can enter into binding contracts, buy and sell property, sue and be sued, be held responsible for its actions, and be taxed. Corporations account for 18 percent of all U.S. businesses but generate almost 82 percent of the revenues. Most large well-known businesses are corporations, but so are many of the smaller firms with which you do business.\n\n\u00a0\n
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    Advantages and Disadvantages of Corporations<\/h2>\n
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    Factors<\/h2>\n<\/td>\n

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    Consideration<\/h2>\n<\/td>\n<\/tr>

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    Start-up<\/h3>\n<\/td>\n

    		Including filing and licensing fees with accounting and attorney fees, incorporating a business can cost $1,000 to $6,000 or more depending on the size and scope of the business.<\/td>\n<\/tr>
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    Control<\/h3>\n<\/td>\n

    		Shareholders elect a board of directors<\/span><\/span>, a group of people (primarily from outside the corporation) who are legally responsible for governing. Corporate managers don\u2019t necessarily own stock, and shareholders don\u2019t necessarily work for the company.<\/td>\n<\/tr>
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    Benefactors<\/h3>\n<\/td>\n

    		All shareholders share in the profits of the business.<\/td>\n<\/tr>
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    Taxation<\/h3>\n<\/td>\n

    		Corporations are subject to \u201cdouble taxation.\u201d They are taxed by the federal and state governments on their earnings. When these earnings are distributed as dividends, the shareholders pay taxes on these dividends. Corporate profits are thus taxed twice\u2014the corporation pays the taxes the first time and the shareholders pay the taxes the second time.<\/td>\n<\/tr>
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    Capability<\/h3>\n<\/td>\n

    		Corporations are generally able to attract more skilled and talented employees than are proprietorships and partnerships.<\/td>\n<\/tr>
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    Sustainability<\/h3>\n<\/td>\n

    		The corporation has a legal life separate from the lives of its owners. Transferring ownership of a corporation is easy: shareholders simply sell their stock to others.<\/td>\n<\/tr>
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    Financing<\/h3>\n<\/td>\n

    		Incorporation makes it possible to raise funds by selling stock. Depending on its size and financial strength, it may also have an advantage in getting bank loans.<\/td>\n<\/tr>
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    Liability<\/h3>\n<\/td>\n

    		Incorporation limits the liability<\/span><\/span> to which shareholders are exposed: they are not responsible for the obligations of the corporation, and they can lose no more than the amount that they have personally invested in the company<\/em>.<\/td>\n<\/tr><\/tbody><\/table>\n\u00a0\n
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    Ownership and Stock<\/h2>\nCorporations are owned by shareholders<\/span><\/span> who invest money in the business by buying shares of stock<\/span><\/span>. The portion of the corporation they own depends on the percentage of stock they hold. For example, if a corporation has issued 100 shares of stock, and you own 30 shares, you own 30 percent of the company. The shareholders elect a board of directors<\/span><\/span>, a group of people (primarily from outside the corporation) who are legally responsible for governing the corporation. The board oversees the major policies and decisions made by the corporation, sets goals and holds management accountable for achieving them, and hires and evaluates the top executive, generally called the CEO (chief executive officer). The board also approves the distribution of income to shareholders in the form of cash payments called dividends<\/span><\/span>.\n\n<\/div>\n
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    Key Takeaways<\/h3>\n