Introduction
Far Horizon's owner is contemplating revising the way the business is structured. Currently the business is structure as a Sole Proprietor. Several alternate business structures may provide additional benefits for Far Horizon. One of Far Horizon's goals is to raise additional capital. The potential investors have required a forty-nine percent ownership of the business. In order for the current owner of Far Horizon to retain operating control of the business and to raise capital, four types of business organization merit investigation. Two types of corporations "C" and "S" would provide structure for gaining capital but have substantial documentation requirements. Two types of Partnerships, General and Limited provide the ability to maintain control of the operations of the business but can subject the owner to significant liability. Each of the four options is described in more detail below.
C-Corporation
In a C-Corporation, the shareholders have the protection of limited liability. The Shareholders liability cannot be greater than the amount they have invested in the business.
Dividends from a C-Corporations are taxed twice, once at the corporate level and again on the individual income taxes of the shareholders receiving the dividends.
C Corporations have to ability to change ownership of stocks and add new shareholders relatively easily. C-Corporations can have unlimited numbers of shareholders and different classes of stock. A corporation is a separate legal entity from its shareholders. A corporation has perpetual life, meaning that the corporation will continue to exist regardless of the status of the shareholders of the corporation.
With C-Corporations, the shareholders are separate from management. Shareholders do not take on management responsibilities, and management does not have owner responsibilities.
S-Corporation
In an S-Corporation, the shareholders have the protection of limited liability. The Shareholders liability cannot be greater than the amount they have invested in the business. S-Corporations do not pay taxes on profits and losses at the corporate level. Profits and losses distributed to the shareholders are reported on their individual income taxes.
S Corporations have to ability to change ownership of stocks and add new shareholders relatively easily. An S-Corporation is limited to 100 shareholders. A corporation is a separate legal entity from its shareholders. A corporation has perpetual life, meaning that the corporation will continue to exist regardless of the life or death of the shareholders of the corporation.
With an S-Corporation, shareholders actively engage in management decisions and the daily operations of the business.
Corporations are very involved to create.
Corporation – “A business organization that exists as a legal entity and provides limited liability to its owners.” (Longenecker, Petty, Palich, Hoy, Pg. 205) The main advantage of a corporation is that the business liability falls onto this entity instead of the individuals that own it. The disadvantages of this organization are found mostly in its formation. A corporation is expensive to create and requires compliance with state
A nice advantage to owning a S corporation is that it is limited liability which means that the owner/owners of the company
...s corporation, and it will probably go through many more transformations in the years to come.
A corporate owner is an Individual or entity who owns a business entity to profit from the successful operations of the company. Generally, has decision making abilities and first right to
All shareholders have limited liability. They are only liable for the amount they have put into the business. If a company closes down, shareholders can only lose the money they have invested. They will not be liable for anything else. Limited companies are owned by their shareholders.
A company is separate from its employees, shareholders or members in that the connection between them is usually a mere contract of employment which may be terminated leaving both parties to go their own ways. The same generally applies however to those businesses which are not companies. There is also more importantly usually a separation between the company and its owners.
The benefits of a corporation The pierce corporate veil is exposing the shareholders to personal liabilities{RMBCA}. Brennan’s Inc. is a family owned restaurant that has family members as owners and shareholders. The court case involves a dispute with another family member. The corporation is the legal entity and it separates individuals who comprise; therefore, protecting the shareholders from personal liabilities. However, you can pierce the corporate veil:
Finally, I will discuss which type of corporation I prefer. A Review of Corporate Roles and Duties The Role of the Board of Directors. The corporation’s business is carried out by its management, under the direction of the Board of Directors. The Board, and each committee of the Board, has complete access to management. Also, the Board and committee member’s have access to independent advisors as each considers necessary or appropriate.
On one hand, businesses must be profitable to survive and corporations must earn a higher return on the shareholders equity than would be realized if the money were deposited on a no-risk bank account. The profits that are made create trust from investors and are usually reflected in higher stock-prices, which makes it easier to grow the company further towards its goals. The profits are not only a result, but also a source of corporate competitive health and wealth. On the other hand, companies are networks of parties and people working together towards a shared goal and not merely 'economic machines'.
One tax issue that Limited Liability Companies possess, with respect to taxation, are issues involving self-employment taxes. An S corporation’s capacity to diminish and sometimes completely do away with self-employment taxes is one of the foremost causes for why an LLC will get passed up as the entity of choice. Self-emplo...
... big difference is that variable capital corporations can have unlimited variable capital. There are also limited liability corporations. These corporations are limited to 50 stockholders and require less capital than the previous two corporations.
In contrast , the shareholder theory organisations or organisation's decision-makers only have the responsibility to their shareholders by increasing the organisation profits and should only make the decisions to increase as much as possib...
This particular statute allows for corporations and such to obtain several, but not all, constitutional rights as any person or persons. In particularly own property, sue and be sued under criminal and civil law, enter contests. Moreover, because corporations and such are considerate as “person”, business has the legal rights for its debts and damages. On the contrary, persons who are employed by a particular association are liable for their own misconduct and law-breaking while acting on behalf of a corporation. In addition, corporation has rights for its own actions, has rights such as: limited free speech and to advertise their product ("The Rights of Corporations," 2009). Likewise, businesses have the responsibility to elect a CEO, provide continuity; increase profits, social responsibilities, and manages recourses effectively (“Functions & Responsibilities of a Corporation").
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.