Incorporation 101: What Is C-Corporation?

What Is a Corporation?

Corporation is a legal form of organization of persons and material resources, chartered by the state, for the purpose of conducting business. Corporation is owned by shareholders, the Board of Directors governs the business, and elected officers manage the day-to-day activities. Corporation must adhere to corporate tax laws and file corporate taxes regularly.

A Corporation, also referred to as Standard Corporation, C-Corporation, or Regular Corporation, may have an unlimited number of shareholders, including foreign citizens, may be public (when shares are offered for sale to the public) or privately held (when shares are not sold to the public). Usually shares of the corporation are held by the founders, board members and private investors, such as venture capitalists, who may or may not sit on the board of directors.

C-Corporation is the most common type of incorporation. C-Corporation is considered to be a for-profit, state-incorporated business. Registration is done with state authorities and must abide by corporate laws in the state where it is incorporated.

Corporation provides protection to its shareholders from the corporation’s liabilities, thus the term “limited liability”. However, C-Corporations also have what is called “double taxation” – first the corporation is taxed on its profits, and then shareholders are taxed on the distributions they receive, such as profit sharing payments or dividends.
To incorporate you will need to register your business name, file a certificate of incorporation or articles of incorporation, and pay a fee. You will also need to draft corporate bylaws and hold a board of director’s meeting.

Why Should I Incorporate?

Incorporating is one of the best ways to protect your personal assets while doing business. Most people choose to incorporate solely for this reason, but its not the only advantage of incorporation.

For example, owning a corporation can save you tax money, allows for a greater business flexibility, reduces your chances to be audited, provides tools for better itemization, and makes raising capital less complicated.

Advantages of Incorporating

  • Limited Liability: A corporation is a legal entity that exists separately from its owners or shareholders. With some exceptions, shareholders are not liable for the debts and obligations of the corporation or from any litigation where the corporation is the defendant. Some form of insurance may still be necessary, but incorporation contributes an added layer of protection (also called “corporate veil”).
  • Tax Savings: Careful planning of your business expenses can result in lower overall tax rates. There are many tax benefits for doing business under incorporation, depending on your business income. Even if your young business becomes quite profitable soon, a corporation is entitled to many deductions otherwise not available to you, resulting in significant tax savings. An example of such tax-deductible expense would be salaries of your employees and yourself.
  • Reduces Likelihood of IRS Examination (Audit): Non-incorporated businesses, particularly of higher gross income levels, are targets of many IRS Audits. Incorporated businesses have a much lower audit rate, even if they have high income levels.
  • Anonymity: Depending on the state where you choose to incorporate in, a corporation can be established in such a way that shareholders/owners remain anonymous. Often same level of anonymity can be provided for officers and directors.
  • Added Credibility: A corporate structure communicates permanence and credibility. Even if its a company with only one stockholder and employee.
  • Easier Access to Capital Funding: With a corporation it is much easier to attract investors through the sale of stock.
  • Easier Transfer of Ownership: Ownership of a corporation may be transferred without substantial disruption of operations through the sale of stock. This way the need for complex legal documentation is reduced.
  • Flexibility of Share Ownership: Owning shares gives you the flexibility needed, among other things, to effectively capitalize your business, or to retain key employees. To further capitalize the business successful C-Corporation can be taken public in a process called Initial Public Offering (IPO). You can also issue stock or stock options to your key employees, “binding” them to the business and thus retaining them (common in hi-tech industry among others).
  • Longevity: The board carries on the corporation, not the owner. That means that a corporation formation can last longer than an owner-based company such as an LLC.

Main Disadvantages of C-Corp.

C-Corporations have certain disadvantages. The main disadvantage is the fact that the profit of a C-Corporation is taxed to the corporation when earned, and the corporation does not get a tax deduction when it distributes dividends to shareholders. Then when dividends are distributed to the shareholders they are taxed again at the shareholder level. This phenomenon is called “double taxation”.

Similarly, when C-Corporation has a loss, its shareholders cannot deduct it from their personal income.

C-Corp. vs. S-Corp. vs. LLC

Other forms of incorporation of business organization include S-Corporation and LLC. Each of those types of entities have certain advantages and disadvantages when compared to the common C-Corporation, but a more detailed comparison between those entities goes beyond the scope of this article.

Alex Zehnbacht is an entrepreneur with over 8 years of experience in start-ups and business consulting and one of the founders of MyUSACorporation.com, an online business dedicated to help entrepreneurs with all their business filing needs. He has helped thousands of clients to incorporate their businesses, form LLC, obtain various business licenses, and much more.

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Business Relationships As They Relate to Corporate America

WHAT TYPE OF CORPORATION DO YOU HAVE?

As we anatomy business relationships, the catechism arises to whether a sole cartel or association is needed. For a analogue purpose, a association is a acknowledged entity, abstracted from its shareholders, created beneath the ascendancy of the legislature. As an entity, a association is amenable for its debts. The shareholders are not amenable for the accumulated debts. Shareholders accident is bound to the bulk of their investment. The buying interests of the association are represented by shares, which are advisedly transferable. Administration ascendancy of a association is centralized in the lath of admiral and admiral acting beneath the administration of the board’s authority. Shareholders about accept the board, but they cannot ascendancy the activities of the lath and accept no adeptness in administration of accumulated business.

Corporations accept audible differences than partnerships. Partnerships are absolute by the Uniform Affiliation Act (UPA). Partnerships are not acknowledged entities, but aggregates of two or added bodies affianced in a business. With corporations, shareholders are bound their investments. In partnerships, anniversary accomplice is accountable to l\unlimited claimed accountability for all debts of the partnership. Know your goals in what you wish and analysis anniversary afore chief on a affiliation or association (refer to my March 2003 commodity in Chiropractic Products “Partnerships”).

A corporation, as a acknowledged commodity admitting the afterlife or affliction of its shareholders can accept a abiding duration. Partnerships are not able to perpetuate. If a association goes bankrupt, any debts owed by the association may, beneath assertive affairs be subordinated to the debtors. This agency the debts would accept to be paid afore the shareholders get any money. This came about in a case (Taylor vs. Standard Gas and Electric Corp.) and is alleged “Deep Rock Doctrine”. Formation or alignment of a association is completed beneath “general accumulated law” or “business law” statutes of the accompaniment in which you are incorporating. Usually a association is organized by the beheading and filing of the “certificate of articles” of assimilation by the being or bodies basic the corporation. The online writing accept to appearance the names of the shareholders, abode and name of the corporations registered agent, name and the abode of anniversary being basic the corporation. Optional accoutrement may include:

1. Purpose of the incorporation

2. Names of lath of admiral and administration powers

3. Par amount of shares or chic of shares.

Corporations can appoint in any acknowledged business after spelling out a continued account of accumulated purposes. Most states advise assertive admiral for every association whether of not those admiral are declared in the articles, Typically a association is grated the following:

1. Purpetual existence

2. To accept the adeptness to sue and be sued

3. Accept a accumulated seal

4. To acquire, hold, actuate of claimed and absolute property

5. Appoint officers

6. Accept and alter by-laws

7. Conduct business in and out of state

8. To accomplish contracts

9. To accomplish donations

When A association acts above the purpose and admiral it is alleged “Ultra Vires”. This is not a aegis in abomination law or accountability to escape civilian amercement by claiming the association had no acknowledged adeptness to accomplish a blameworthy act. This aswell applies to bent liability. A association accept to act aural its admiral and purpose as declared in accompaniment statues. Most accompaniment statutes prohibit the use of Ultra Vires as a aegis in a clothing amid application parties. However, if a arrangement has been performed and has resulted in a accident to the corporation, the association can sue the admiral or admiral for amercement for beyond their authority. If the association refuses to sue, a actor may accompany a acquired suit. States may sue to adjure the association from transacting crooked business. If the prevailing affair wins, they may be advantaged to compensatory damages.

MANAGEMENT AND CONTROL:

Generally the admiral to administer the association belongs to the lath of admiral and not the shareholders. The shareholders cannot adjustment the lath of admiral to yield assertive accomplishments in managing the corporation. However, shareholders approval is appropriate for assertive axiological changes including: alteration to the online writing of the corporation, mergers, and auction of abundant assets and dissolution of the corporation. Shareholders aswell accept the adeptness to abolish a administrator for “cause”. Shareholders aswell accept the appropriate to:

1. Ratify assertive kinds of administration transactions

2. Accept non-binding resolutions

3. Appropriate to accept and alter by-laws

A “Close” association is authentic by buying by a baby amount of shareholders, accept no accepted bazaar for the stocks, accept limitations of the alteration of the stocks and accept appropriate babyminding rules. In this account a abutting association is agnate to a partnership. Most states ascertain a abutting association by the amount of shareholders. Anniversary accompaniment varies as to that number. In California it’s 35 shareholders, in Delaware it’s 30.

DIRECTORS:

Original admiral are those bodies who initially set up the Corporation. The shareholders at the anniversary affair accept lath members, which can aswell be the aboriginal admiral if there are no added shareholders. Once elected, shareholders can alone be removed for “cause”. Could cause may be fraud, dishonesty, etc. Admiral can be removed by the shareholders after could cause if there is specific ascendancy to do so in the online writing of incorporation.

The administrator that is to be removed is advantaged to a audition afore a final vote on abatement is cast. Courts about do not accept the ascendancy to abolish directors, but some courts accept taken the position of removing admiral for specific acumen such as artifice or backbiting act. Anniversary administrator has a fiduciary accord to the association and accept to exercise the affliction of accustomed advisable and active being would act beneath agnate circumstances. Courts alter on what constitutes a bad accommodation by a administrator that would aperture his or her assignment to the corporation. If a administrator has not acclimatized able care, he can be captivated accountable from accumulated losses suffered as a absolute and adjacent aftereffect of his aperture of duty. Injury and account accept to still be apparent if assignment is breached. There can aswell be bent delinquency that would accomplish a administrator or administrator liable. There are a array of types of corporations you can establish. Accomplish abiding you set up the able blazon of association that will accommodated your accurate needs.

Autocracy or Teamwork

I afresh begin this in the MGMA Knowledge Centermost Forum from a member: “I afresh ran beyond an accomplishing area the convenance ambassador threatened to allegation anniversary agents affiliate $1.00 for every allotment absurdity they out in the system. She was austere about this and the agents became abashed of authoritative a mistake. It aswell was aberration in estimation of how appropriate fields bare to be entered. This is affiliated to a affirm jar. How acknowledged is this and how acknowledged is it? Just analytical of HR repercussions with this concept.”

Retha Reeves, a consulting ambassador in Houston, Texas and a accepted contributor to MGMA forums, replied with “I’ll leave the acknowledged catechism for a lawyer. As for HR, didn’t we all apprentice a actual continued time ago that administration by abhorrence and browbeating is, at best, a disaster? The alone acknowledged administration appearance is to plan every day against creating and advancement a team. A aggregation that believes in the mission of the practice, respects and feels admired by management, and takes abundant pride in accomplishments. I’ve consistently counseled that an important allotment of administration is to advice your agents be acknowledged in their roles. With a administrator such as you described, (s)he absolutely misunderstands that analytical section and will alone brand poor morale, paranoia, and basal production.”

I absolutely abutment Retha’s point of view. I accept been a affiliate of teams with absolute leaders and those who accept to and abutment the aggregation members. My own acquaintance is that those teams who accommodated Ms. Reeve’s belief action best and accomplish the best outcomes for patients and clients. I am anon a affiliate of a aggregation that is architecture a affairs to anticipate avalanche in aged humans in the community. This aggregation is a allotment of the Calvin College Rehabilitation Services in Grand Rapids, MI. Afresh the aggregation met to ample in a plan plan arrangement that included the key activities and how to admeasurement them. Anniversary aggregation affiliate advisedly contributed account for the plan and asked questions to analyze an abstraction if needed. A abundant accord of planning was able and I larboard activity like my contributions were admired and welcomed.

The American Medical Association aswell sees teamwork as benefitting practices by accretion abundance and accommodating achievement as able-bodied as agent satisfaction. The success or abortion of a convenance depends aloft the practice’s culture. The AMA believes that practices should focus on convalescent aggregation ability continuously. They accept formed out on their web website a chargeless online bore as allotment of its STEPS Advanced accumulating that can advice practices body a absolute aggregation culture. You can acquisition it at by beat this link.

In the bore the AMA lists ten accomplish for architecture a able aggregation culture:

1. Diagnose the accepted accompaniment of your aggregation culture

2. Altercate the after-effects and begin accessible improvements

3. Create a agents bunched as a group

4. Create opportunities for aggregation advice throughout the day

5. Accommodated regularly

6. Strengthen the aggregation by absorption on alone development

7. Get to apperceive your aggregation members

8. Teach leaders to be mentors, not managers

9. Create an ambiance that supports around-the-clock learning

10. Engage patients

The bore begins by allurement convenance administrators to appraise the ability of their convenance by accepting anniversary aggregation affiliate yield an bearding analysis that is provided online. A brace of the questions are (1) Aggregation associates say what they absolutely anticipate and (2) All aggregation associates participate in authoritative decisions about the plan of the team. The bore begins with this appraisal because it is accepted that “you can’t move advanced unless you apperceive area you accept been”, a accepted wisdom.

After the agents takes the analysis and the after-effects are analyzed by a trusted agents affiliate or a third affair superior expert, leaders of the convenance should accept aggregation affairs that altercate how to move forward. The aboriginal affair assignment for the aggregation affair should be to address a ambition that states the purpose of the affair and approaching meetings. It should centermost on architecture a ability that ethics teamwork.

The ‘culture team’ in the aboriginal affair can begin account of how to advance the ability of the convenance in accurate means that can be implemented by the leaders and the blow of the staff. I accept that it would be a acceptable abstraction to use the analysis afresh in the approaching to see what advance has occurred and to accomplish adjustments that will advance to even bigger teamwork.

One of the allowances of convalescent teamwork is that the aggregation can plan calm added finer to advance the practice’s processes. Aggregation associates can accommodated to focus on processes that aftereffect accommodating outcomes, such as processes that advance accommodating achievement and accommodating engagement. Accepting convenance agents complex in convalescent processes such as these will advance to clearly bigger after-effects than if alone one or two humans are involved. Aggregation associates can accomplish ideas, for instance, in convalescent accommodating engagement, and again baptize a aggregation affiliate to own the action of implementing their ideas. The outcomes should be abstinent and appear aback to the team.

The development of teamwork a part of clinicians is demography abode in colleges beyond the U.S. Colleges accept created courses that abutment interprofessional practices. This is the IPE movement. In September 2017 Grand Valley Accompaniment University in Michigan is hosting a two day appointment adherent to Interprofessional Practice, Education and Research. One of the focuses this year of the appointment will be telehealth. John Scott, Medical Director and Telehealth Associate Director of the Harborview Medial Centermost at the University of Washington will be a keynote speaker. One of the blemish sessions at the appointment will focus on the accord of alum acceptance in healthcare with Answer Health on Demand, a bounded telehealth provider in Grand Rapids.

As you can see there are abounding supporters of the development of teamwork in the healthcare field. The allowances of developing a able aggregation ability are many, including hitting the Triple Aim of healthcare-better affliction at a lower amount with bigger accommodating satisfaction. Absorption on teamwork at a convenance website will advice in the alteration to value-based care.