The Different Types of Corporations
A business is a legal entity in which individuals or groups work together to promote a product or service. In a typical business, individuals work together to either create and sell goods or services, or act as representatives to sell the goods or services to customers. Others simply purchase the goods and services offered by the business. Either way, a business can generate a profit for its products and/or services sold. The profits are usually shared by the members of the business in some way, though not necessarily directly.
Businesses come in all shapes and sizes, but they all have one thing in common: they must be organized to deliver value to customers or investors. This delivery can take many forms, including the sale of goods and services, the provision of goods and services to others, and the distribution of information and data to help others deliver more information and data to consumers or fellow businesses. Nearly all businesses today exist to deliver value to a customer in one way or another. Some businesses are global, with outlets in every country around the world. Others may only operate domestically, with operations within a state or even single city.
All businesses must establish legal structure in order to legally profit from their activities. Legal structure comes in many forms, but perhaps the most prevalent type is corporation. A corporation is a legal entity that exists separate from the owners. While the corporation may be made up of a collection of individual shareholders, the business itself remains separate and distinct from each of its individual shareholders.
A corporation must generally follow the same taxation procedures as businesses outside of the United States. The IRS, which is a government agency, will typically grant requests for extensions to the deadlines for filing. Extensions are granted based on a business’s capability to cover costs and meet revenue requirements. Tax payments are made by the corporation on behalf of the shareholders, following a formal resolution by the corporation. There are some exceptions to this general rule. Some types of corporations have been known to be operated sole proprietors, which mean that they are self-employed and don’t have any shareholders.
Limited Liability Company (LLC) and Corporation are two different forms of corporations. A limited liability company (or LLC) is a separate entity from its owners, with only a single set of shareholders. Many small businesses start out as either an LLC or a corporation, but most choose to convert to a limited liability company later. Many businesses operate as partnerships, and some choose to form corporations in order to allow their partners greater control over their business. Some people prefer to avoid the hassle and paperwork of incorporating by starting out with a simple limited liability company (LLC), and some choose to incorporate themselves and hold off on using a corporation until they are ready.
Business partnerships are formed between unrelated business entities to form a new venture. Some partnerships are simple, such as a business partnership that allows a baker and his cake shop to enter into a contract so that if one bakery buys a product from the other, both businesses are entitled to a percentage of the sales. More complex business partnerships can include financial partnership, stock ownership and contribution, as well as joint management. Partnerships are sometimes used as a means to restrict losses and increase profits, as well as for tax advantages.