Question

What is corporation and three types of corporations?

Answer 1

A corporation is a body or an institution that is recognised as a legal entity by law. A corporation can have its own rights, responsibilities, liabilities, privileges distinct from its members. These corporations are mainly used to conduct business. There are mainly three types of corporations, C corporation, S corporation and limited Liability company.

C corporation: A C corporation is a business entity that can a have unimited number of shareholders (domestic or foreigner ) and it's shareholders have limited liability. The term C corporation here refers that this type of business entity profits are taxed separately from its owner.

S corporation: S corporation is one type of business entity that refers to small business. There is a limitaion on the number of shareholders (100) they can have. Also shareholders has to be domestic or residents of the country. Profits, losses and deductions are passed on to the shareholders individually and they report income or losses on individual tax returns. S coporations can also be in the form of specific trust, estate or tax exempt organisation.

Limited Liability Compnay: comparative to these two , limited liability corporation is a pass through entity. The profits and losses are passed on to the owner and they file it on their individual tax return. But here the owners are not personally liable for the companies debt.