How it works
A corporate structure protects management and
workers in the case of litigation or other claims. It is,
however, a more complex structure and subject to
greater regulation than the simpler business entities of
sole proprietorships and partnerships. A corporation is
owned by one or more stockholders, and is managed
by a board of directors and run by the company’s
officers, who are appointed by the board of directors.
The company retains any profit made and may
Corporations
A corporation is a business entity considered distinct from its
employees and shareholders. The primary purpose of forming a
corporation is for shareholders to avoid personal liability.
distribute part of it to the stockholders in the form of
dividends. Corporate and securities laws regulate
the sale of shares. Legally, the stockholders cannot
be held liable for the company’s actions and debts.
Publicly traded
company
A publicly traded company is
usually a large business—such
as a technology company—
with stock traded on a stock
exchange, such as NASDAQ.
Public characteristics
Issues securities through an Initial Public Offering (IPO)
Can sell future equity stakes
Has greater access to financing
Must meet reporting requirements set out by Securities
and Exchange Commission (SEC)
Reduced control for initial owners
Types of incorporation
Anyone who operates a business may incorporate by registering articles
of incorporation. General incorporation (C Corporation) is the most
common structure. An S Corporation, created through IRS tax election,
provides limited liability; it is favored by small businesses because it
combines the advantages of sole proprietorship, partnership, and the
corporate forms of business structure. Nonprofits can also incorporate.
Stockholder An individual, group,
or organization that owns shares
in a company
Doing business as (DBA) Operational
rather than company name
Professional corporation (PC)
Corporate form used for primarily
for doctors, lawyers, and similar
professional service providers
NEED TO KNOW
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How companies work
Business ownership
56.5%
of UK limited
companies have
employees; the
remaining 43.5%
are single-member
companies (SMCs)
CANADIAN
COMPANIES
Privately held
company
In a privately held company,
a limited group of private stock
owners controls the company.
These companies do not offer
shares to the general public on
stock exchanges.
Private characteristics
May issue stock and have shareholders. Shares,
however, do not trade on public exchanges
Management is not required to file disclosure
statements with the SEC
Dependant on private funding
Businesses in Canada can
be sole proprietorships,
partnerships, or
corporations. A business
can also be run as a
cooperative, a business
that is owned and
controlled by its
members. Canadian
companies must
register in the province
or territory in which
they are domiciled.
A limited liability company (LLC) is a hybrid between a corporation
and a partnership. The upside of an LLC is that it offers many
of the advantages of a corporation, but is cheaper to create
and maintain. Taxation rules vary, depending on the Articles of
Organization of the LLC. Laws also differ from state to state. A
limited liability company is an “LLC,” not an “Inc.” or “Corp.”
LIMITED LIABILITY COMPANIES IN THE US
Corporations operate as legally
and financially independent
entities. They may be publicly
traded or privately held.
Corporation
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