What Are Corporations?
A business is a legal entity where various individuals work together for a common purpose. In a normal business, individuals generally work together to create and sell goods or services to customers. Others also purchase the goods and services sold by the company. However, a business can make a profit for the goods and services it sells. This profit is known as the income of the business.
A business comes into being when a legal entity is created. The legal entities could be one corporation, partnership or joint stock companies. A partnership relationship may exist between individuals who are forming a business. Each partner contributes with his/her personal assets to create a share in the business. These shares are known as stock.
Examples of corporations include limited liability companies, corporations, partnerships and sole proprietorships. Limited liability corporations mean that the corporation carries no personal liability for the debts of any other corporation. This protects personal assets of the partners. On the other hand, sole proprietorships means that one person owns and controls the entire business. He could hire workers, but has no authority to manage the business. He also is responsible for the sale of products or the production of services to the customers.
The number of shareholders is also an important consideration in forming a business. The shareholders should have majority control over the corporation. This means that more than half of the total number of shareholders must be involved in meetings, voting, etc. More than the necessary number of shareholders or members should be represented at all times in meetings and all corporate decisions must be passed by a majority of the shareholders present in the corporation. All profits made by the corporation are the profits of the shareholder(s).
A corporation may be considered as an entity. That is, it exists as a legal entity separate from its owners and even sometimes separated from other related entities. It can create or authorize different types of corporations. It can create another corporation for the purpose of borrowing money or issue stock as a class on a securities exchange. It can create corporations in order to carry on its activities. It can issue shares of stock as a method to keep accounting records.
Many people want to start small businesses. However, they face difficulties because they have little knowledge about business laws, capital structure, business contracts, financing, marketing, distribution and selling. For those who have little knowledge and experience, C Corp can be a good choice for you to raise money for your small business.