What is a Corporation?
Corporations are legal entities that are separate and distinct from their owners, known as shareholders. Corporations have their own rights and liabilities, which are different from those of the individuals who own them. This means that the corporation can enter into contracts, sue and be sued, and own assets in its own name, rather than in the name of the shareholders.
2. What is the purpose of a corporation ?
The main purpose of a corporation is to make a profit for its shareholders. However, corporations can also have other goals, such as providing a service or product that benefits society, or promoting a particular cause.
3. How are corporations created ?
Corporations are created by filing articles of incorporation with the state government. This document outlines the name and purpose of the corporation, as well as the names and addresses of the people who will be involved in running it. Once the articles of incorporation have been filed, the corporation is considered to be a separate legal entity, and it can begin to conduct business and enter into contracts.
4. What are the advantages of incorporating a business ?
There are several advantages to incorporating a business, including:
* Limited liability: The shareholders are not personally responsible for the debts and liabilities of the corporation.
* Perpetual existence: The corporation can continue to exist even if the shareholders die or sell their shares.
* Ability to raise capital: Corporations can issue stocks and bonds to raise money for expansion and other purposes.
* Centralized management: The board of directors is responsible for making decisions and overseeing the management of the corporation.
5. What are the disadvantages of incorporating a business ?
There are also some disadvantages to incorporating a business, including:
* Double taxation: The corporation must pay taxes on its profits, and the shareholders must also pay taxes on the dividends they receive.
* Complexity: Corporations are subject to a lot of regulations and legal requirements, which can be time-consuming and expensive to comply with.
* Loss of control: Once the corporation is established, the shareholders may have less control over the day-to-day operations of the business.
6. What is the difference between a C corporation and an S corporation ?
A C corporation is a type of corporation that is taxed separately from its owners. An S corporation, on the other hand, is a type of corporation that is taxed like a partnership, with the income passing through to the shareholders. There are some differences in the requirements and limitations for each type of corporation, but both types offer limited liability protection for the shareholders.
7. What is the role of the board of directors ?
The board of directors is responsible for overseeing the management of the corporation and making major decisions about the direction of the business. The board is made up of a group of individuals who are elected by the shareholders to serve in this capacity.
8. What is the difference between a shareholder and a stakeholder ?
A shareholder is someone who owns shares of the corporation, and has a financial interest in the success of the business. A stakeholder, on the other hand, is anyone who has an interest in the success or failure of the corporation, such as employees, customers, and suppliers.
9. What is the purpose of a corporate charter ?
A corporate charter is a document that outlines the purpose and scope of the corporation, as well as the rights and responsibilities of the shareholders and the board of directors. It is similar to the articles of incorporation, but it provides more detailed information about the specific goals and objectives of the corporation.
10. What is the difference between a subsidiary and a parent company ?
A subsidiary is a company that is owned by another company, known as the parent company. The parent company has control over the subsidiary, and may use it to conduct business in different markets or industries. A parent company, on the other hand, is a company that owns one or more subsidiaries.
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