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Understanding Corporations: Benefits, Differences, and Setting Up

Explore the benefits and costs of setting up a corporation, learn about C-corporations and Subchapter S corporations, and understand how limited liability companies work.

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Understanding Corporations: Benefits, Differences, and Setting Up

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  1. PowerPoint Presentation • Section 7.2 • Pages 113-117

  2. 7.2 Corporations What you’ll learn • The benefits and costs of setting up a corporation • The differences between a C-corporation and a Subchapter S corporation • How a limited liability company works

  3. 7.2 Corporations Why it’s important • In a corporation, the owner or owners of a business are protected from liability for the actions of the company.

  4. 7.2 Corporations Key Terms corporation C-corporation limited liability Subchapter S corporation nonprofit corporation Limited Liability Company

  5. 7.2 Corporations I. CORPORATE FORMS Corporations protect owners from liabilities.

  6. 7.2 Corporations II. WHAT IS A CORPORATION? • A corporation is a business that is chartered, or registered, by a state. • A corporation legally operates apart from its owner or owners.

  7. 7.2 Corporations III. C-CORPORATIONS The C-corporation protects an entrepreneur from being sued for all debts of the corporation.

  8. 7.2 Corporations IV. C-CORPORATION ADVANTAGES A. A C-Corporation can raise money by issuing shares of stock.

  9. 7.2 Corporations 1. Common stock holders have voting rights. 2. Preferred stock owners also receive their investment back first in case of business failure.

  10. 7.2 Corporations B. A corporation also offers its owners, or shareholders, limited liability. The owners are only liable up to their individual investments.

  11. 7.2 Corporations C. Corporations can create pension, retirement, and profit sharing plans.

  12. 7.2 Corporations V. C-CORPORATION DISADVANTAGES • It can cost between $500 and $2,500 in fees to create a C-corporation. • Corporate income is heavily taxed.

  13. 7.2 Corporations VI. SUBCHAPTER S CORPORATIONS A Subchapter S corporationis taxed like a sole proprietorship or partnership.

  14. 7.2 Corporations VII. NONPROFIT CORPORATIONS Nonprofit corporationsare legal entities that take money for reasons other than the owners’ profit.

  15. 7.2 Corporations A. Charity B. Public benefit C. Religion D. Mutual benefit

  16. 7.2 Corporations VIII. LIMITED LIABILITY CORPORATIONS LLCsbenefit from the limited liability of a corporation and the taxadvantages of a partnership.

  17. End of Section 7.2 7.2 Corporations

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