A Professional Corporation is an incorporated business structure formed by individuals or groups of individuals that would other wise be exclude from corporate formation eligibility.
These professionals include doctors, lawyers, accountants, engineers, etc. The group must be organized with the intent of providing professional services, and must consist of professionals licensed to practice their particular profession. Professional Corporations provide for many of the same liability shields and tax benefits that traditional Corporations do. More Professional Corporation Information.
A Nonprofit Corporation is an incorporated entity designed to perform activities and enter transactions without the traditional intent of generating profits. A Non-Profit Corporation provides for many of the same shields from liabilities to its shareholders that a traditional Corporation provides. Contrary to its title, a Non-Profit Corporation can in fact generate profits, but that must not be its primary intent, and all profits must be used in furtherance of the non-business goals of the Non-Profit Corporation.
There are no capital distributions or dividends paid to shareholders in a Non-Profit Corporation. More Nonprofit Information. Your information remains confidential Privacy Policy.
Business Types Business start-up and personal asset protection services. Get Incorporated. Business Types Unincorporated Business Structures Sole Proprietorship A Sole Proprietorship describes any type of business owned by one individual, and is among the most basic of business structures.
More Sole Proprietorship Information Partnership A Partnership describes any business or enterprising venture where there is more than one owner involved. The S corp pays specific corporate taxes pertaining only to passive income and gains outside what the shareholders keep. This allows S corps to avoid the double taxation that often comes with C corps. Before those shareholders see their profit, your company first has to pay corporate taxes on the income generated. Then, the already-taxed money is paid out to the shareholders as profit, who report it on their personal tax returns and pay tax again.
With an S corp, the profits are passed directly to the S corp shareholders, meaning shareholders are responsible for the taxes. This allows the S corporation to avoid corporate tax, as the profits are being taxed at a personal level when the shareholders report it on their income tax returns. But, there's a catch: any shareholders of an S corp can't be corporations, nor can they be partners with the company. This means shareholders are generally part of a trust or estate, or are individuals and non-profits.
This limits who can be a shareholder, but again, allows you to take advantage of lower corporate taxes in many cases. S corporations can be general partnerships, LLCs, or corporations, making them rather flexible. While there are certain tax benefits, it's worth noting the IRS tends to pay extra attention to S corporations. This is because the structure provides loopholes through which shareholders may try to evade taxes. For example, an S corp could claim employee pay is actually a distribution and avoid taxes.
A C corporation is similar to an S corporation, in that it can be a partnership, corporation, or LLC. A C corp is also privy to certain tax benefits, chief of which is that the profits of the company are taxed independently of the profits of the owners. Unlike S corps, a C corp can have any number of shareholders from any background. This means C corp shareholders can also be employees of the corporation itself. But, a C corp must have a board of directors. The board of directors acts as the decision-makers for the company, while the shareholders are more like the financial backing.
C corporations can be hit with double taxation, however, which happens when the profits of the company are taxed at the corporate level and then again on individuals' income tax returns. This is often avoided by spreading profits out to employees as benefits, which allows the corporation to be taxed at a lower rate on a personal tax return. But, this complicated corporate structure often necessitates an account or financial advisor, which is an added cost.
If your plan is to grow your business and eventually sell it, a C corporation can be a great way to keep your personal assets as a separate legal entity from your professional corporation. He owns many companies through his investment firm Berkshire Hathaway.
The Marketing department is considered by some business professionals as the most important entity in the corporate structure. Without this department, sales or new customers cannot be realized. The Finance department is also vitally important, as it is responsible for acquiring capital used in running an organization. Other segments of corporate structure may consist of the Accounting department, HumanResources department, IT department, and the Operational aspect of the particular company.
These main six corporate departments represent the major managing resources within a publicly traded company; though there are often smaller departments either within the major segments or in autonomous form. Another way a corporate structure can be defined is by business divisions.
A division of a business is a distinct part of the firm, however the company is legally responsible for all of the obligations and debts of each division. In a large organization, various parts of the business may be run by different subsidiaries, and a business division may include one or many subsidiaries. Each subsidiary is a separate legal entity owned by the primary business or by another subsidiary in the hierarchy.
Hewlett Packard HP is a good example of a corporate structure including multiple divisions. The divisions of HP — e. However, Compaq a part of HP since operates as a subsidiary, using the Compaq brand name.
Corporate Structure : Hewlett Packard is an example of a corporation with multiple divisions and subsidiaries. Another example is Google. Google Video is a division of Google, and is part of the same corporate entity. However, the YouTube video service is a subsidiary of Google because it remains operated as YouTube, LLC — a separate business entity even though it is owned by Google.
As a result, their losses cannot exceed the amount which they contributed to the corporation as dues or payment for shares. This enables corporations to socialize their costs. Socializing a cost is to spread it to society in general. Without limited liability, a creditor would probably not allow any share to be sold to a buyer at least as creditworthy as the seller.
Limited liability reduces the amount that a shareholder can lose in a company so it allows corporations to raise large amounts of finance for their enterprises by combining funds from many stock owners. This increases the attraction to potential shareholders and increases both the number of willing shareholders and the amount they are likely to invest.
Another advantage is that the assets and structure of the corporation may continue beyond the lifetimes of its shareholders and bondholders. This allows stability and the accumulation of capital, which is then available for investment in larger and longer-lasting projects than if the corporate assets were subject to dissolution and distribution.
However, a corporation can be dissolved by a government authority, putting an end to its existence as a legal entity. The directors of the company are responsible for day-to-day activities. They owe a duty of care to the company and must act in its best interest. They are usually elected annually. Smaller companies can have a single director, while larger ones often have a board comprised of a dozen or more directors. Except in cases of fraud or specific tax statutes, the directors do not have personal liability for the company's debts.
Incorporation effectively creates a protective bubble of limited liability, often called a corporate veil, around a company's shareholders and directors. As such, incorporated businesses can take the risks that make growth possible without exposing the shareholders, owners, and directors to personal financial liability outside of their original investments in the company. How To Start A Business.
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