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Corporation
A corporation is a form of fictitious entity. It allows for the investors,
executive, and agents not to be personally liable for corporate debt in
most instances. Under the Internal Revenue Code, the corporation - if
a small corporation - can often elect that the stockholders pay income
tax on profits, not the entity itself. This is called an S corporation.
This corporate form of a business entity is well recognized and the laws
governing it are clear and well worked out. This entity requires a certain
amount of administrative paperwork be done in order to maintain its existence.
It is owned through stock, which can be readily transferred and are subject
to the securities laws discussed on this web site under business finance.
A corporation must have a registered agent in the state of incorporation
and in each state where authorized to do business. A registered agent
is simply an individual resident or a corporation in the state that consents
to receive service of process should someone want to sue the company.
To maintain recognition of the entity, you must pay annual or semiannual
filing fees to the state of incorporation and any other states where "doing
business", you must maintain corporate records including minutes
of meetings of members in accord with the corporation bylaws, which governs
the operations of the corporation, you must never co-mingle corporate
funds with your personal funds, e.g., never use the corporate check account
to pay for personal expenses. The corporation should be adequately capitalized
also. If you do not keep these points in order, a court may not recognize
the existence of the entity and hold the stockholders or directors or
executives personally liable for company debt. This is called piercing
the corporate veil. Also, when entering into any contract, make sure that
the corporate agent signs on behalf of the corporation rather than personally.
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