In modern economies of developed countries, corporations are of a great importance and have a sufficiently long history of development. Corporations exist in many industries and can bring some serious investments and realize the long-term investment, to conduct basic research. Thus, we are going to define a corporation in this paper. It is also necessary to discuss the major attributes of a corporation and other necessary aspects of its functioning.
Defining a corporation, it is possible to say that a corporation is a legal entity where the ownership of the shares is represented and limited by the capital invested in the business. Directing shares in circulation, a corporation is of a high concentration of capital and can afford more sophisticated organization of management, compared with the forms of ownership such as sole proprietorship and partnership.
Corporations dominate in American business society nowadays. They control large capital flows, are a huge number of employees and provide the population with a large assortment of goods and services.
Additionally, according to Bowman (1996), corporations have a huge impact on the social and political life. In other words, the corporation includes multi-level organization, which also possesses a multifaceted field of activity, and a variety of technical and human capital.
Observing the major attributes of a corporation, we can state that exactly in corporations participants are responsible for the performance of a corporation only by the property that they have voluntarily transferred to a collective use; a corporation is not responsible for the performance of organizations included in it, unless this is specifically stated in the statute. It also provides high demands on all participants, as the quality performance of each person affects the commercial success of a whole corporation. In addition, Alkhafaji (1990) demonstrated that the presence of well-tested management system of a corporation will help to achieve success in any area of its development.
Taking into account the fact that a corporation exist apart from the shareholders, we can note that the shareholders have limited liability for various corporation’s debts. Kaysen (1996) stated that “the personal assets of shareholders are not at risk for satisfying corporate debts or liabilities even though they own and manage the corporation. Corporations also offer tax advantages for its shareholders.” There is no doubt that a Corporation, according to Patel (2010), is really responsible for paying taxes at a specific corporate rate for any kind of profit it makes. In such a way, investors are also obliged to pay taxes, but their taxes depend on what they receive in form of various bonuses and dividends, so they do not need to pay corporate taxes.
Analyzing different kinds of corporation, we can state that an S corporation and a C corporation have many in common, but there are also some differences between them. The main distinctive difference can be found in the sphere of taxation. For instance, C corporations are separately taxable entities and they pay taxes at the specific corporate level, filing a corporate tax return; while S corporations are considered to be pass-through tax entities, which pay no income tax at the corporate level and they file another form of tax return that is called an information federal return. According to Murphy (2010), “The profits/losses of the business are instead “passed-through” the business and reported on the owners’ personal tax returns. Any tax due is paid at the individual level by the owners.”
To sum up, we have defined a corporation in this paper, and have observed all questions required to this topic.
Bowman, S. (1996). The Modern Corporation and American Political Thought: Law, Power, and Ideology. Pennsylvania State University Press.
Patel, R. (2010). Facilitating Stakeholder-Interest Maximization: Accommodating Beneficial Corporations in the Model Business Corporation Act. St. Thomas Law Review, Vol. 23.
Kaysen, C. (1996). The American Corporation Today. Oxford University Press.
Alkhafaji, A. (1990). Restructuring American Corporations: Causes, Effects, and Implications. Quorum Books.
Murphy, E. (2010). Managing S Corporation At-Risk Loss Limitations: Grouping or QSub Elections Can Maximize Loss Recognition. Journal of Accountancy, Vol. 209.
Landau, Z. (2005, November). Recent Reform and Simplifications for S Corporations. The CPA Journal, Vol. 75.
Fellows, J. and Jewell, F. (2006, May). S Corporations and Salary Payments to Shareholders. The CPA Journal, Vol. 76.