| It is essential to the future of your business to pick the | | | | The board of directors is supposed to represent the |
| right legal structure for it from the immediate outset. | | | | interests of the shareholders and they are elected to |
| The reason for this is that the sort of legal entity that | | | | their position annually by all the shareholders - one vote |
| you select will affect the company's decision-making | | | | per share owned. This means that major shareholders |
| process, your legal responsibilities and your capability to | | | | are almost guaranteed a seat n the board. The Board |
| raise investment finance. The three major kinds of | | | | concerns itself with policy and appoints an executive |
| legal structure are sole proprietorship, partnership and | | | | officer and managers to run the company and |
| corporation or limited company. | | | | implement its policies. |
| This article will concentrate on corporations. A | | | | The Advantages of a Partnership. |
| corporation differs from other legal forms of business | | | | Shareholders have limited liability, in fact only the value |
| in that the law considers it to be an artificial legal being, | | | | of their investment in the shares they bought. This is |
| possessing the same rights and responsibilities of an | | | | very attractive. |
| actual person. It has an existence separate from its | | | | Corporations have the best opportunity of raising funds |
| owners and as such can sue and be sued, own | | | | either through the stock market or the banks. |
| property, agree to contracts, and engage in business. | | | | Corporations have an unlimited life, because shares |
| Additionally, because it is a legal, separate entity, it can | | | | from a decreased's estate can be sold on. This fluidity |
| continue to exist even after a change of owners. | | | | of ownership is very important, because shareholders |
| The Corporate Charter | | | | do not have their hands tied and can sell up when they |
| In order to form a corporation in the USA, you need to | | | | want. |
| be granted a charter, the costs and details of which | | | | Corporations tend to use specialist which gives them |
| vary from state to state. In the UK a limited company | | | | the edge over other forms of business in the |
| can be bought 'off the shelf' for £100 or so. The | | | | marketplace. |
| charter includes such details as the company's name, | | | | The Disadvantages of a Partnership |
| names of principal shareholders, number and types of | | | | Earnings from corporations are taxed twice: the |
| shares to be issued, place and type of business. | | | | company is taxed and the employee or shareholder is |
| Stockholders or Shareholders | | | | taxed again when paid. It varies but it is usually a |
| Everybody who owns shares or stock is a co-owner | | | | combination of corporation tax, income tax and capital |
| of the business with you, although that does not mean | | | | gains tax. |
| that all shareholders will participate in the running of the | | | | The start up costs for a corporation can be very high, |
| business except for voting at the AGM and possibly | | | | compared with the other forms of enterprise. |
| on some other issues. This method of enabling people | | | | Corporations are closely regulated and are required to |
| to become co-owners is very flexible and allows the | | | | produce reports of various kinds which are then filed |
| company to raise the largest amount of investment | | | | as a matter of public record. Usually, you will need to |
| capital. Ownership is fluid. | | | | hire expensive professionals to compile these reports: |
| The Board Of Directors | | | | solicitors and accountants. |