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Types of Corporations

GENERAL CORPORATION:

The most common of all corporate structures is the General Corporation. The General Corporation, like all other corporations, is a separate legal entity that is owned by stockholders (shareholders, i.e. investors). A General Corporation may have an unlimited number of stockholders. Due to the legal nature of the corporation, stockholders are protected, personally, up to the amount of their investment, from the creditors of the corporation.

   Advantages

Personal assets are protected from business debt and       liability

Corporation is perpetual (life extending beyond the       illness or death of the owners)

Insurance, travel, and retirement plan deductions are       TAX FREE benefits

The ownership of the corporation is easily transferable

Ownership will not affect current management

Raising capital through the sale of stocks and bonds is       simplified

   Disadvantages

More Expensive to form than proprietorship or       partnerships

Legal formality

Must abide by state and federal rules and regulations

CLOSE CORPORATION:

A Close Corporation has a few minor differences as compared to General Corporations. In most states where they are recognized, Close Corporations are restricted as to the number of shareholders, usually between 30 - 50. The shares of stock upon sale are to be offered to existing shareholders first. Generally a Close Corporation is particularly suited for the entrepreneur looking to run a "one-person" corporation or for a small group of individuals who will all actively participate in the operation of the business.

SUB CHAPTER S CORPORATION:

S Corporations have the same basic advantages of General or Close Corporations with a major distinction of tax liability. Where as the previous corporation file and pay federal taxes on profits of the corporation, the Sub-S Corporation eliminates Federal Corporate Income Tax. The IRS allows all profits to "pass through" all profits to the shareholders personal tax return.

    Sub Chapter S Corp. Restrictions

Can only be a domestic corporation

Only one class of stock is permitted

No more than 75 stock shareholders

Only individuals can be stockholders

Each stockholder must be a citizen of the US

Note: 95% of all corporations our company helps file are Sub Chapter S.



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