CORPORATION

PRESENTED BY: COURSE FACILITATOR:

• Huzaifa Azeem • Sir Younus Qadri
• Mahnoor Baqai
• Madiha Shaheen SUBJECT:
• M. Bilal • Business Economics
 INTRODUCTION
What is corporation?

• A legal entity separate from its owners

• Has many of legal powers individuals have such as the ability to enter into contracts, own assets and
borrow money.
• The corporation is solely responsible for its own obligations. Its owners are not liable for any
obligation the corporation enters into.

How is it formed?

• Corporation must be legally formed. The corporation files a charter with the state it wishes to
incorporate in. The state then Charters the corporation, formally giving its consent to the
incorporation
Who are owners of a corporation?

• A shareholder is someone who owns shares in a corporation,

and they are the actual owners of the corporation.
• There is no limit to the number of shareholders, and thus the
amount of funds a company can raise by selling stock.
• Owner is entitled to dividend payments.

Who manages the corporation?

• In corporation, ownership and direct control are typically separate.

• Board of directors have ultimate decision-making authority.
Organizational chart of typical corporation
 TYPES OF CORPORATIONS:

Limited
Publicly held C-
Liability
corporations Corporation
Company

S- Non-Profit
Corporations Corporations
Publicly held Corporations:
A publicly held corporation is a publicly traded corporation. The shares of such corporations are traded on a
public stock exchange

For Example:

The New York Stock Exchange or NASDAQ in the United States, Pakistan Stock Exchange etc).

Limited Liability Company:

A limited liability company (LLC) is a business structure in the U.S. that protects its owners from personal
responsibility for its debts or liabilities. Limited liability companies are hybrid entities that combine the
characteristics of a corporation with those of a partnership or sole proprietorship.

For Example:

Facebook, started as a college experiment in 2004. It had almost 1.79 billion active users each day in May 2020.
Almost 85 percent of these were outside of Canada and the US.

Amazon was originally started in 1995 in a garage when it was an online bookstore. It now delivers everything
imaginable, from food to clothes to electronics.

C-Corporations:
“C Corporation” is a business entity that can have an unlimited number of shareholders, which may include
shareholders who are foreign citizens. Shareholders are protected from the corporation’s liabilities. The corporation
is taxed on its profits, and shareholders are also taxed on the distributions they receive, such as profit sharing
payments or dividends. This mechanism is also called “Double Taxation”
For Example:

McDonald's, Starbucks, etc: Each is a huge business that grew quickly from scratch. Not coincidentally,
each is a C-corp.

S-Corporation:
S Corporation is created in the same way as a C Corporation but is different in owner limitation and tax
purposes. An S Corporation consists of up to 100 shareholders and is not taxed as separate – instead,
the profits/losses are shouldered by the shareholders on their personal income tax returns.

For Example:

Jacks, Inc. is formed as an S corporation in the state of Florida. Robert owns 51% of the corporation,
and Brenda owns 49%. In 2015, the company’s net profits totalled $20 million. When filing their
personal tax returns, Robert will report $10.2 million in income, and Brenda will report $9.8 million.

Non profit Organization:

commonly used by charitable, educational, and religious organizations to operate without generating
profits. A non-profit is exempt from taxation.

For Example:

Edhi, Shaukat Khanum Cancer Hospital, Chipa Welfare Association etc.

 Advantages Of Corporation

It is a separate
legal entity it Transferable
Continuous life
means limited ownership rights
liability

Lack Of mutual Ease of Capital

agency accumulation
 Advantages Of Its Types

S Corp may pass income directly to shareholders without having to pay federal corporate taxes.

S Corp can transfer interests or adjust property basis without facing adverse tax consequences or having to comply with
complex accounting rules.

C Corps don’t have restrictions when it comes to ownership(an unlimited number of shareholders)

Tax benefits are available to non-profits, including the ability to receive grants from both the federal government and
private foundations.

LLCs typically do not pay taxes at the business entity level. Any income or loss is "passed-through" to owners and
reported on their personal income tax returns.
 DISADVATAGES OF CORPORATION
• Corporations are expensive to form and operate. It might be easy for
established corporations to raise capital by selling shares, but forming and
EXPENSIVE maintaining a corporation can be costly.

• Filing your articles of incorporation with your secretary of state can be

quick, but the overall process of incorporating is often a long one. You will
LENGTHY likely have to go through extensive paperwork to properly determine and
APPLICATION
PROCESS document the details of the organization and its ownership.

• Alongside the lengthy application process is the amount of time and energy
RIGID necessary to properly maintain a corporation and adhere to legal
PROTOCOLS requirements.
AND
STRUCTURE

• Most corporations (like C-corps) face double taxation, which means that the
business income is taxed at the entity level as well as the shareholder level
DOUBLE (based on their percentage of profits earned).
TAXATION
 CONCLUSION:

In short, There are many different types of corporations to

choose from when deciding to start a business. For the business
owner, choosing the right structure is a key step in shielding
them from liability and to reap more revenue.