1. Corporations TSW compare and contrast S-corporations and C-corporations by analyzing ownership, taxes, and the formation of both.

2. Characteristics of a Corporation Operate as its own entity Unlimited life Limited Liability Transferring ownership is relatively easy Owners do not manage it (professional mgmt) Easy to obtain capital Government Regulations

3. Top U.S. Corportations

4. Corporations Advantages Limited Liability Easy to raise capital Easy to transfer ownership Unlimited Lifetime Disadvantages Double Taxation  Tax the profits of the Corp.  Tax the stockholder’s dividends Owner’s do not have a say in the day-to-day business affairs

5. Hierarchy of a Public Corporation

6. Privately Held  Ownership is restricted to small group of investors.  Stock is not traded publicly.  L. L. Bean, Dell, Publix. Publicly Held  Larger corporations.  Stock is traded publicly.  Act of initially issuing stock: “going public.” Private vs Publicly Held Corporations

8. S-Corporation C-Corporation Can have no more than 75 owners Owners must be US citizens No restrictions on ownership Differences in Ownership….

9. S-Corporation C-Corporation “Pass-Through” Taxation  Any taxes on profits/loses are passed through the business and reported on the owner’s personal tax returns Any tax due is paid at the individual level by the owners Taxed as a separate entity Double Taxation  Corporate income  Dividends- owners taxed as personal income Differences in Taxes….

11. S-Corporation C-Corporation Likely to be a small privately held company Most all of the major Fortune 500 companies Other Differences….

12. Formation…. Articles of Formation must be filed with the state. Pay filing fees Once formed…  Adopt bylaws  Hold initial meeting of directors  Issue shares of stock S- Corporations have to file a 2553 Form with the IRS in order to gain “Pass-Through” taxation.

13. Questions? What are three characteristics of a corporation? What are two major difference between S-corp. and C-corp.? Why would a business want to change from a sole- proprietorship or a partnership to a corporation? Which type of corporation is more prevalent in our society? Why do you think that is the case?