A corporation takes the general partnership concept and turns the business into a legal entity separate from its owners, investors, and managers. A corporation technically has a life of it’s own. A corporation is formed by a statutory agent and group of operating officers. The owners are called shareholders, and their evidence of ownership is called stock, or common stock. The shareholders vote for a board of directors who oversee the day-to-day operations.
In smaller private corporations an individual may be an officer, shareholder, and manager of operations. What is unique about a corporation is that ownership can be transferred by a simple sale of stock either to existing owners or to anyone who is willing to buy at the set price. Corporations can also sell stock on the stock markets. A corporation must pay taxes on the income it earns since it is a legal entity.
The corporation will file IRS form 1120, and pay taxes on the profits that the company earns. Most states and localities also require corporations to file income tax returns. Shareholders are also taxed as individuals on capital gains, if they sell their ownership stocks, and on dividend, which are profits passed on to shareholders. Unlike
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