Characteristics of the United States CorporationA Corporation is a separate entity unto itself. It has the power to do things that an individual can do, such as purchase land and enter into contracts, and even has its own federal identification number, similar to an individual having a social security number. Corporations receive the benefit of liability protection, allowing its Shareholders, Directors, Officers and employees to shield their personal assets, in most circumstances, from business creditors and individuals (or other business entities) who seek remedies stemming from the negligence or wrongdoings of the Corporation. This protection, however, may be pierced ("Piercing the Corporate Veil") if a Corporation does not take the necessary steps to ensure that the entity is separate from its Shareholders, Directors, Officers and employees. Consequently, it is important to speak to a skilled business attorney who can advise you on how to maintain your company's liability protection.
A Corporation is also one of the most formalized entities, requiring such considerations as annual shareholder meetings, extensive annual filings, and extremely detailed financial records. Corporations are also one of the most suitable business entities to raise outside capital through the sale of its stocks (also called shares; which are essentially a percentage of the ownership of the organization based upon the number of total shares). Private Corporations often go "Public" through the use of an Initial Public Offering by soliciting investors in exchange for the aforementioned shares; whereby an investor hopes to receive annual payment in the form of dividends as determined by the Board and based on the Corporation's annual profit and other factors. The investor may also hope that the shares increase in value whereby he may sell his ownership in the Corporation, in the form of shares, to another individual (or sometimes back to the Corporation) for profit.
Understanding the Structure of a Virginia CorporationA Corporation is one of the most common types of business entities as the entity may take on several forms including, but not limited to, Stock Corporations, Nonstock Corporations, and Professional Corporations. Corporation may further be characterized as a Nonprofit Corporation or Subchapter S Corporation, based upon the Corporation's purpose and IRS tax classifications. A Corporation is controlled by its Shareholders, managed by its Board of Directors ("Board"), and operated by its Officers and employees. It is important to note that it is possible, in limited circumstances, for a member of the Board ("Director") to also be a Shareholder. Furthermore, ownership in a Corporation does not necessarily mean that you are a part of its management or operations.
Corporations derive their authority from state statutes and most are subject to federal law and monitored federally. In the Commonwealth of Virginia, a Corporation is organized under Virginia Statutes §13.1-601 et seq. for Stock Corporations (the "Virginia Stock Corporation Act") and §13.1-801 et seq. for Nonstock Corporations (the "Virginia Nonstock Corporation Act")
Double Taxation of a Corporation in the United StatesCorporations are subject to what is known as 'Double Taxation.' Under this tax structure a Corporation is taxed for all remaining profit left in the corporation at the end of the calendar year. Thereafter, when the Corporation issues dividends to its Shareholders, the Shareholders are taxed on the dividends. Therefore, money taxed at the end of the calendar year and thereafter distributed later as dividends has been taxed twice. Experienced business attorneys and corporate accountants will be able to assist Corporations in maximizing their tax value to avoid or reduce the costly effects of 'Double Taxation.'
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