How Many Owners in a Corporation
The owners in a corporation are referred to as shareholders, if operating as a C corporation, there can be an unlimited amount of owners.3 min read
2. Creation of a Corporation
3. Ownership in a Corporation
How many owners in a corporation is the number of shareholders a corporation has. The owners in a corporation are referred to as shareholders; if operating as a C corporation, there can be an unlimited amount of owners. However, if operating an S corporation, which is a subset of a C corporation, then there can only be a maximum of 100 owners.
Corporation: An Overview
When owning and operating a corporation, there are several corporate formalities that must be followed. For example, corporations must elect a board of directors to manage the business. In turn, the board will hire officers who will be responsible for the daily oversight of the business. Every year, the corporation must hold an annual shareholder and director meeting, which will take place one after the other. In addition to holding annual director and shareholder meetings, such meetings must be accompanied by meeting minutes that are kept on file for shareholders to view at any time.
Furthermore, depending on which type of corporation you own (C or S Corp), there will be ongoing requirements for tax payments. Particularly, if you own a C corporation, there are generally quarterly tax requirements. S corporations, however, operate as pass-through tax entities, meaning that all business profits and losses are passed onto the shareholders who then report it on their individual tax returns.
Shareholders in a corporation can benefit from receiving dividend distributions. Such distributions, however, are subject to taxation at the personal level. This means that the C corporation might incur double-taxation, once at the corporate level and again at the personal level if distributions are paid out during the taxable year.
While there could be some disadvantages to operating a corporation, particularly due to the ongoing corporate formalities and tax implications, there are also great benefits of operating a corporation. One of the greatest benefits of a corporation is the fact that it is viewed as a separate and distinct legal entity from its owners, which allows for limited liability protection for all shareholders. Therefore, while states differ in the formation and ongoing requirements of corporations, all states offer the same corporate protection laws for corporations (and LLCs). This means that the shareholders cannot be held personally liable for the business’s debts.
Creation of a Corporation
The corporation is created by filing the Articles of Incorporation in the respective state where the business plans on operating. This is the core document that provides basic business information. Included in this document will be the names of the board of directors, their titles, and responsibilities. You’ll need to submit this document to the Secretary of State, and include the applicable state filing fee. Once approved, there are still additional steps that need to be taken before doing business. This includes drafting the corporate bylaws, obtaining an Employer Identification Number (EIN), obtaining licensing and permits, and filing ongoing reports on an annual and/or bi-annual basis.
Ownership in a Corporation
Ownership in a corporation can be quite confusing to someone who is unfamiliar with the duties and responsibilities of those involved. The main parties in a corporation include the following:
Simply put, the owners of the business are referred to as shareholders. While the shareholders are “owners,” they don’t have full oversight. Therefore, if you own shares in Microsoft, you are a shareholder owner, but not an actual owner of the business; you won’t have an ability to make significant business decisions simply because you own stock in the company. If, however, you own 51% or more in a business, you will have greater voting power and ability to make important decisions regarding the business.
Every year, the shareholders elect a board of directors. Depending on the state, board members might be on the board for a period of one year or more. In turn, the board will elect officers to manage the business. Such officers include the CEO, CCO, COO, CFO, President, etc. These individuals will have daily oversight into the company’s affairs and are responsible for ensuring that it runs smoothly. Ultimately, however, the officers and board members are working for the shareholders— to keep the company afloat and earning an even bigger profit.
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