PowerPoint Presentation

Section 7.2Section 7.2 Pages 113-117Pages 113-117

What you’ll learnWhat you’ll learn The benefits and costs of The benefits and costs of setting up a corporationsetting up a corporation

The differences between a The differences between a C-corporation and a C-corporation and a Subchapter S corporationSubchapter S corporation

How a limited liability How a limited liability company workscompany works

7.2 Corporations

Why it’s importantWhy it’s important In a corporation, the owner In a corporation, the owner

or owners of a business are or owners of a business are protected from liability for protected from liability for the actions of the company.the actions of the company.

7.2 Corporations

Key TermsKey Termscorporationcorporation

C-corporationC-corporation

limited liabilitylimited liability

Subchapter S corporationSubchapter S corporation

nonprofit corporationnonprofit corporation

Limited Liability CompanyLimited Liability Company

7.2 Corporations

I. CORPORATE FORMSI. CORPORATE FORMSCorporations protect owners Corporations protect owners from liabilities.from liabilities.

7.2 Corporations

II. WHAT IS A II. WHAT IS A CORPORATION?CORPORATION?

A.A. A A corporationcorporation is a business is a business that is chartered, or that is chartered, or registered, by a state.registered, by a state.

B.B. A corporation legally A corporation legally operates apart from its operates apart from its owner or owners.owner or owners.

7.2 Corporations

7.2 Corporations

III. C-CORPORATIONSIII. C-CORPORATIONS

The The C-corporationC-corporation protects an protects an entrepreneur from being sued entrepreneur from being sued for all debts of the for all debts of the corporation.corporation.

7.2 Corporations

IV. C-CORPORATION IV. C-CORPORATION ADVANTAGESADVANTAGES

A. A. A C-Corporation can raise A C-Corporation can raise money by issuing shares of money by issuing shares of stock.stock.

7.2 Corporations

1.1. Common stock holders Common stock holders have voting rights.have voting rights.

2.2. Preferred stock owners Preferred stock owners also receive their also receive their investment back first in investment back first in case of business failure.case of business failure.

7.2 Corporations

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

7.2 Corporations

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

7.2 Corporations

V. C-CORPORATION V. C-CORPORATION DISADVANTAGESDISADVANTAGES

A.A. It can cost between $500 It can cost between $500 and $2,500 in fees to create and $2,500 in fees to create a C-corporation. a C-corporation.

B.B. Corporate income is heavily Corporate income is heavily taxed.taxed.

7.2 Corporations

VI. SUBCHAPTER S VI. SUBCHAPTER S CORPORATIONSCORPORATIONSA A Subchapter S corporationSubchapter S corporation is is taxed like a sole taxed like a sole proprietorship or partnership.proprietorship or partnership.

7.2 Corporations

VII. NONPROFIT VII. NONPROFIT CORPORATIONSCORPORATIONSNonprofit corporationsNonprofit corporations are are legal entities that take money legal entities that take money for reasons other than the for reasons other than the owners’ profit.owners’ profit.

7.2 Corporations

A.A. Charity Charity

B.B. Public benefit Public benefit

C.C. Religion Religion

D.D. Mutual benefit Mutual benefit

7.2 Corporations

VIII. LIMITED LIABILITY VIII. LIMITED LIABILITY CORPORATIONSCORPORATIONS

LLCsLLCs benefit from the benefit from the limited liability of a limited liability of a

corporation and the taxcorporation and the tax advantages of a partnership.advantages of a partnership.

7.2 Corporations

End of Section 7.2End of Section 7.2