A corporation is an organization usually a group of people or a company authorized by the state to act as a single entity and recognized as such in law for certain purpose. In the other world, A form of business operation that declares the business as a separate, legal entity guided by a group of officers known as the board of directors.
The Corporate Structure: Corporation have their own organizational structural with three components- stockholders, directors and officers.
Stockholder: Are the owners of corporation, holding share of stock that provide them with certain rights. They may receive a portion of the corporation profits in the form of dividends and they can sell or transfer their ownership in the corporation at any time. Stockholder can attend annual meetings, elect the board of directors and vote on matters that affect the corporation in accordance with it charter by laws. Each share of stock generally carries on vote.
Directors: The stockholders elect the board of directors to govern and handle the overall management of the corporation. The director sets major corporate goals and policies, hire corporate officers and oversee the firm operation and finance. Corporation firm may have as few as 3 directors.
Officers: The officers of a corporation are its top management and include the president and chief executive officer (CEO), vice president, treasurer and secretary who are responsible for achieving corporate goals and policies. Officers may also be board member and stockholder.
If you want to create a corporation you are facing a list of important – but manageable task, you must do-
Choose an available business name that complies with your state corporation rules. You should contact your state office for specific rules but the following guidelines usually.
The name cannot be the same as the name of another corporation on the file with the corporation office.
The name must end with a corporate designator, such as “Corporation”, “Incorporation”, “Limited” or an abbreviation on of this words (corp., inc., or Ltd)
The name cannot contain certain words that suggest an association with the federal government or restricted type of business, such as bank, corporative federal, national or reserve.
Appointing Director: Director make major policy and financial decisions for the corporations. For example the directors authorize the issuance of stock, appoint the corporate officers and set their salaries and approve loans to and from the corporations directors are typically appointed by the initials owners of the corporations before the business open.
File format paperwork, usually called “article of incorporation” and pay a filling fee that depending on the state where you incorporate.
Create corporate by laws, which lay out the operating rules for your corporations.
Hold the first meeting of the board of directors. At this meeting direction usually :-
Set the corporation fiscal or accounting year.
Appoint corporate officers.
Adopt the corporate by laws.
Authorize the issuance of share of stock and
Adopt an official stock certificate form and corporate seal.
Issue stock certificate to the initial owner (stockholder) of the corporation.
Obtain any license and permits that are require for my business.
Advantages Of Corporation:
Limited liability: A key advantages of corporations is that they are separate legal entities that exist apart from their owners. Owner liability for the obligations of the firm is limited to the amount of the stock they own. If the corporations goes bankrupt, creditors can look only to the assets of the corporations for payment.
Ease of transferring ownership: Stockholder of the public corporations can sell their shares at any time without affecting the status of the corporations.
Unlimited life: The life of a corporations is unlimited. Although corporate charter specify a life term, they also include rules for renewal. Because the corporation in an entity separate from its owner does not affect its existence, unlike a sole proprietorship or partnership.
Tax Deduction: Corporation are allowed certain tax deductions, such as operating expenses, which reduces their taxable income.
Disadvantages of corporations: Although corporations offer companies may benefits, they have some disadvantages:-
Double taxation of profit: Corporations must pay federal and state income taxes on their profits. In addition, any profits paid to stockholders are taxed as personal income, although at a somewhat reduced rate.
Cost of complexity of formation: As a outlined earlier, forming a corporation involve several stapes, and cost can run into thousands of dollars including state filing, registration and license fees as well as the cost of attorneys and accountants.
More government restrictions: Unlike sole proprietorship and partnerships, corporations are subject to many regulations and reporting requirements. For example corporation must register in each state where they do business and must also register with the Securities and Exchange Commission (SEC) before selling stock to the public.
Dissolution of corporation: With the corporation, there may come a time when the people who own and run the business voluntarily decide it time to call it quits. Formally dissolve a corporation from some causes:
Board meeting to vote on dissolution of corporation. And it’s the first step of dissolve.
Notice from the court for dissolve it.
Fail for doing annual general meeting
Md Ibrahim Hossain
Department Of Management Studies,(8th batch)
Bangabandhu Sheikh Mujibur Rahman Science And Technology University
