Corporations
A corporation is a business form that is a legally defined, artificial being, separate from its owners
- It has many of the legal powers that people have
- A corporation is solely responsible for its own obligations
- The owners are not liable for any obligations of the corporation
Ownership
- No limit on the number of owners
- The entire ownership stake of a corporation is divided into shares known as stock
- An owner of a share of stack is known as a shareholder, stockholder, or equity holder
- The collection of all the outstanding shares of a corporation is known as the equity of the corporation
Tax Implications
- A corporation’s profits are subject to taxation separate from its owners’ tax obligations
- Shareholders of a corporation pay taxes twice (Double taxation)
- The corporation pays tax on its profits
- The shareholders pay their own personal income tax on the profit distributed by the corporation
Flow-through Entities (Income trust)
A business in which all income produced flows to the investors and virtually no earnings are retained within the business.
Income Trust
A trust that holds income-producing assets directly or holds all the debt and equity securities of an income-producing corporation within the trust.
- Exemption for double taxation
- Business Income Trusts
- Energy Trusts
- Real Estate Investment Trust (REIT)
- Only REIT have no tax at the business level beyond 2011