1.15:
Corporation
A corporation is a form of business recognized as an independent entity, separate from its owners.
When a business entity incorporates, it is automatically classified as a C corporation unless it opts for a different designation, such as an S corporation.
A key benefit for the owners or the shareholders is limited liability, which means that they are not personally responsible for the debts and liabilities of the corporation.
Corporations may face complex regulations, like financial reporting and shareholder meetings, and are more expensive to operate than other business forms.
Consider Nike Inc., a prominent C corporation known worldwide for its athletic footwear, apparel, and equipment.
Nike operates independently of its owners. It can also own assets, borrow debt, and conduct business independently.
Nike uses its corporate status to expand its brand, enter new markets, and conduct business globally.
Nike shareholders benefit from the company's success through dividends and the potential for an increase in stock value.
The advantages of the corporate form in facilitating business expansion, global presence, and investor protection make it a popular choice for business organizations.
1.15 Corporation
A corporation has unique characteristics that extend beyond its status as a separate legal entity. One notable feature is the ability to transfer ownership easily. Shares of a corporation can be bought and sold without impacting its operations, allowing ownership to change easily without disrupting business activities.
For example, Amazon.com, Inc. has capitalized on the ability to issue shares to raise significant funds. This capital access has enabled Amazon to invest in extensive logistics networks, advanced technology, and global expansion, establishing itself as a dominant player in e-commerce and cloud computing.
Additionally, corporations benefit from centralized management. This structure allows shareholders to elect a board of directors, which appoints officers to manage daily operations. This separation of ownership and management can lead to more professional and efficient business operations.
Corporations also have distinct tax advantages. For example, they can deduct the cost of employee benefits, such as health insurance and retirement plans, reducing overall taxable income. Moreover, they can carry forward losses to offset future profits, providing potential tax relief over time.