| A corporation is a legally created body that serves to | | | | again as income to the shareholders of the |
| separate the operations of a business from its owners. | | | | corporation. Other downsides include the requirement |
| The act of incorporation is a form of business | | | | to have a specified management and organizational |
| registration that accomplishes that fact and allows the | | | | structure, and the need to have a Board of Directors, |
| liabilities of a company to be legally registered with the | | | | annual meetings, and prepare reports to regulatory |
| state. When a business is incorporated it also has to | | | | bodies. |
| have a defined management and organizational | | | | There are a number of forms of corporate registration |
| structure and must meet certain conditions in order to | | | | in the United States. They include standard business or |
| maintain its corporate status. | | | | C corporations and S corporations. C corporations |
| In order to become incorporated the officers of a | | | | have to pay income tax on all income after expenses. |
| company must file articles of incorporation with the | | | | S corporations have a special tax status that allows |
| state and pay all applicable filing fees, levies and other | | | | them to avoid having the corporation treated as a |
| registration costs. In most states it is not legally required | | | | separate entity for income tax purposes. To get S |
| to have a lawyer in order to incorporate but most | | | | corporate status a business has to apply to the Internal |
| businesses use their lawyers and accountants to | | | | Revenue Service a 2553 Form for an exemption and |
| prepare the articles of incorporation for the business. | | | | if this is granted then the income is only taxable to the |
| There are many advantages for a business to | | | | owners or shareholders of the corporation. |
| incorporate. They include the separation of liabilities and | | | | The organizational structure of a registered |
| interests between the company's operators and its | | | | corporation must identify three distinct groups; |
| owners of shareholders. This allows the business to | | | | shareholders, directors, and officers. The officers are |
| operate and accumulate debts and responsibilities | | | | normally appointed by the Board of Directors, who is |
| which are not the total responsibility of the | | | | elected by the shareholders. The officers run the |
| shareholders and directors of the corporations. It is also | | | | company on a day to day basis and report on |
| much easier to raise investment funds for a | | | | activities to the Board of Directors. The Board of |
| corporation rather than other forms of business | | | | Directors then reports to the shareholders at an annual |
| registration. | | | | general meeting of the corporation. |
| One disadvantage of having a C corporation business | | | | Many corporations also have a Chief Executive |
| designation is what is called double taxation. That is | | | | Officer who is the public spokesperson of the |
| because any profits that a corporation makes are | | | | corporation and ultimately responsible for the direction |
| taxed first as income of the corporation and then | | | | and operation of the business. |