The Basics of a General Corporation
A general corporation is a business entity that is owned by stockholders. A corporation is formed by filing official documents with the secretary of state of the state or country it is based in. Ownership of a general corporation is divided up into units of shares of stock for each shareholder. The corporation is considered a distinct legal entity from its owners, and this provides significant legal advantages and disadvantages.
Advantages and Disadvantages of a General Corporation
A general corporation offers a number of advantages to its shareholders. Among these are limited liability, the ability to transfer and sell ownership in the form of stock, access to larger funding opportunities such as venture capital, and the ability to have a life outside its shareholders. In addition, a corporation can continue to exist beyond the life of the founders and the original owners.
On the other hand, a general corporation requires complicated paperwork and filing fees with the state to stay in compliance, and the corporate income is subject to double taxation. This means the profits of the corporation are taxed at both the corporate and individual level. Also, additional laws and regulations may apply to corporate operations.
How to Form a General Corporation
To form a general corporation, the owners must file articles of incorporation with the state that provide details about the business. The legal documents must include the corporation’s name, the information about the shareholders, and the financial details of the corporation.
Then, the shareholders must prepare the corporate bylaws for the operation of the business and the board of directors must be elected, by the shareholders. The state must also issue a corporate charter to the board of directors upon approval of the corporation’s paperwork.
In addition, the owners must complete other legal paperwork, such as registering with the IRS for a tax identification number, opening a corporate bank account, and obtaining applicable business licenses.