Legal Structure of Business - Research Paper Example

The structure of this Delaware Corporation should be a Limited Liability Company, C Corporation, and S Corporation, Nonprofit Corporation or a professional corporation. These types are reliant on the needs and restrictions of each corporation being formed. Given the potential global nature of the business being discussed the type selected to apply to our business is the C Corporation. This is the general or standard corporation for state and federal tax purposes. As a C corporation the ability to sell stock and generate capital as well as take advantage of various tax applications and approaches can benefit the stockholders.

There is no limit on the amount of stock a C Corporation can generate and there is a limited personal liability for stockholders which are also beneficial. The Internal Revenue Service lists various approaches to the taxation requirements for a C Corporation, part of the benefits of using the C Corporation is that the profit of a corporation is taxed when earned, and taxed to the shareholders when distributed. (Corporations, 2011 p 1) The elements most necessary in a General Corporation or C Corporation are three tiers of power, stockholders, directors and officers.

Clear separation of responsibilities and rights for each position, no limit to size, directors run the company, directors are elected by stockholder vote, stockholders own the company, minority stockholders are not responsible for the company (clarify exactly what reflects a minor stockholder) and can be subchapter S if all the qualifications are met. (Incorporating 101, 2011 np) Being a subchapter S is a positive thing for companies with fewer than 100 stockholders. They are allowed tax relief in the form of avoiding the double taxation that occurs with many public companies.

(Subchapter S, 2011 p 1) This means that instead of the taxes being directed at the C Corporation they are directed at the dividends or earnings of the stockholders. Additionally it is important to clarify the roles of the stockholders within the original charter for the corporation. Ensure that the stockholders are limited by their role as electors (depending on amounts of stock owned) of the company directors and possibly officers. The stockholders hold the common stock as issued by the corporate interest.

Majority stockholders can potentially control all the decisions of the company based on their percentage of stock owned. Stockholders are rewarded when the company begins dispensing dividends and if the value of the stock increases upon growth. The directors run the company; the directors are the decision makers with regards to the officers as well as dividends and how much stock can be issued. These decisions while important generally require meetings with all directors or with majority shareholders i.e. stockholders.

Officers in the company make the decisions that run the machinery that operates the company. They control and decide on what is known as the day to day operations of the corporation itself. Officers are can be rewarded with salaries, bonus packages or stock packages or a mixture of all of those. Every corporation must have a president, secretary and treasurer any additional officer positions are at the discretion of the directors. (C Corporation, 2011 para 10) The positions of officers are important in the day to day operations of the corporation; however, the positions of the stockholders and the directors are among the most important as all major decisions that shape the future of the C Corporation are based on the decisions made by majority stockholders.

C Corporation, . (2011). Reference for business, c coporation, structure of a corporation. Retrieved from http://www.referenceforbusiness.com/small/Bo-Co/C-Corporation.html Corporations, . (2011). Irs.gov, corporations. Retrieved from http://www.irs.gov/businesses/small/article/0,,id=98240,00.html Incorporating 101, Initials. (2011). Corp america.com, what is a general corporation?. Retrieved from https://www.delawareinc.com/101/index.cfm?pageid=10068#4 Subchapter S, . (2011). Investopedia, subchapter s (s corporation).

Retrieved from http://www.investopedia.com/terms/s/subchapters.asp