A corporation one of the embodiment of business entities with models that enables it to function as a separate individual in the eye of the law with discrete administration of other owners or partners. The company constantly fronts as an individual with mandate completely and entirely different from other stockholders. Nevertheless, the type of corporation is greatly dependent on some parameters which commonly determines how they are classified. These parameters are as follows:
What is the specify aim or objective of the corporation? That is, the motive behind the creation of the business will arbitrate where the corporation is to be categorized.
How many shares or stocks does the company possess? Conventionally, corporations base their operation on a handful of shareholders who possess the major part of the company stock. The class of corporation is determined by the actual number of these individuals.
Which method does the company use in paying its tax? It is compulsory and mandatory for all companies and any forms of business to pay tax, although methods of payment are complete diverse with respect to the type and nature of the business. Same holds through for corporations.
Is the corporation incorporated? The joining together of two or more corporations makes them become incorporated. The business model is completely transformed by this process and therefore the host company and the amalgamated company or companies will become one massive corporation.
The authorities uses the parameters discuss above to determine the type of corporation your company belongs to. Most of the time, corporation is widely classified into many different types, though some people believe it should be classified into two main categories, which is the famous S and G corporations. Nonetheless, to establish a concrete and tangible corporation, it is important that we narrow down the way your business is being categorized. Below are the different types of corporation and their respective details:
Business or For-Profit Corporation
With respect to the name, this type of corporation is solely for making a substantial amount of profit. A business corporation constantly provide commercial oriented services to customers which on the long run makes them profit. Don’t forget that the main aim and objective of this type of company is to make profit, thus this category depends on the purpose of the company.
A lot of people mix up cooperatives and corporations. If you are part of the lot, get the difference right now. A cooperative corporation is a form of business which is about the same as Business Corporation except that the motive behind the profit is voluntarily and exclusively for the shareholders alone, excluding the company. The cooperative model is applied when sharing profit amongst its members. This is the category for which the sole purpose of the business is based.
This corporation is privately owned, that is stockholders are not members of the public. This type of corporation is mostly common and comprises a greater percentage of all corporations around the world. The objectives of this type of corporation is majorly intended for private activities like banking, exploration, manufacturing, mining etc. as a reminder, religious corporations and charity-based corporations are also private corporations.
This corporation is based entirely on public ownership, that is, members of the public are the shareholders. Officials appointed by the government are responsible for managing and running this type of corporation. Since it is owned by the government, its purpose, aims and objectives is based on publicly oriented activities like energy, education etc. This corporations are consistently independent financially.
This type of corporation is one in which, tax payment is entirely the obligation of the company. Stockholders are not burdened with the issues of paying taxes and thus their individual profits are tax free. This type of corporation is classified as a general category and has the tendency to surpass other categories as well.
This is a corporation in which each shareholder bears the responsibility of paying taxes. Payment shareholder’s tax is not the obligation of the company. The method the corporation use in paying tax is the basis for this category. Like the afore-mentioned category, S corporation can be constituted with other categories that are excluded from the C corporation category.
This is a corporation that trades its stocks and shares freely. Shareholders usually comprises of small group of people like relatives. It is categorized with respect to the number of shareholders. However, this type of corporation may involve requirements that varies with respect to the laws of the country or region.
This corporation is also dependent on the number of shareholders. In this category, the shareholder might just be one individual with ownership of many shares or it could be a different company entirely owning a substantial number of stocks.
In a professional corporation, activities are conventionally carried out with respect to professional disciplines such as medicine, law, engineering or architecture. Corporation in this category is practiced or present almost everywhere around the globe. The ownership and management of a professional corporation rests solely in the hands of these professional.
In foreign corporation, the geographical scale under which it operates is all that matters. The foreign corporation could be registered and certified in one country, say Canada and be performing its operations in other countries such as China, United States or Brazil. These companies stand the chance of benefiting from tax breaks which is advantageous to the corporation and the shareholders as well.
In general, corporation as a type of company usually benefits both the private and the public at large. The nature and type a corporation is categorized may be generalized basically into S corporation or C corporation. Further discoveries will show that all other sub-categories may be found under either of these two main categories. Occasionally, if a corporation fails to provide any form of tax payment method, it is categorized as a C corporation, which as a result holds the company liable for all tax payments.
In conclusion, if you ever decide to join a corporation to become a shareholder, feel free to choose from any of the categories discussed above and begin your voyage towards making profits. Be advised that the stock market is a highly volatile and unpredictable place and anything could happen. It’s either you make mega profit or lose everything you’ve got altogether. But note that any business mind should be prepared for the risks that accompanies business.