According to US corporate laws a Corporation is a legal entity created under the laws of the state of its incorporation. Every state has the power to make laws for incorporation, management and winding up of companies.
Articles of incorporation of any corporation provide for the management of its internal affairs. Bylaws set out the rights and duties of its officers, members and other connected persons. Many states require corporations incorporated in other states to take registration to do business in state.
A corporation is an artificial legal person, which is distinct and separate from its shareholders. Stockholders are not liable for the debts of the corporation. A corporation can sue or be sued in its own name. The continuance of a corporation is not affected by the death of its stockholders. A corporation has a perpetual succession and can be dissolved or wound up through legal formalities.
Both corporate profits and the distribution of the same to shareholders are liable to tax. While corporate profits suffer a lower tax rate, dividend income in the hands of shareholders are liable to higher tax rate.
Joint Venture Corporation
Corporations can also organize themselves into Joint Venture Corporation. A joint venture corporation is a partnership between corporations for mutual profit and gains. Foreign companies form joint ventures with domestic companies to gain access to the domestic market since domestic companies already have requisite permits and approvals. Foreign joint ventures must also abide by international trade laws.
Non Profit Corporation
A non-profit corporation, alternatively known as non stock corporation, cannot distribute its income or any part thereof among its members, directors or officers. These are meant for advancing religious, charitable, social, public, scientific, cultural and educational objects including promotion of sports. Professional associations, research institutes, social service organizations, museums etc. are also organized into non-profit corporations.
A few states have adopted the Revised Model Non-Profit Corporation Act (1986) to regulate non profit corporations. Non profit corporations with religious and charitable purpose are exempt from federal tax. Some states limit tort liability of non profit corporations and exempt these from state tax.
