Series 79: Federal, State, And Municipal Governments

C Corporation

• • Primary organizational structure for large and medium-sized businesses and for publicly held companies
• • Corporation formed at state level; issues shares of stock to shareholders (owners)
• • No qualification requirements for shareholders and shares are freely transferable (subject to securities laws)
• • Shareholders have limited liability for company debts
• • Unlimited length of existence
• • Corporations treated as “persons” for many purposes
• • Subject to double taxation: profits taxed at entity level, dividends are taxable to shareholders

S Corporation

• • Not separate type of entity; is corporation that has elected to be taxed on pass-through basis under IRC Subchapter S
• • Not subject to double taxation: all income and loss passes through to shareholders for tax purposes
• • Some types of corporations (e.g., banks) ineligible for S corporation status
• • Shareholders must be individual U.S. residents; corporations, partnerships, non-resident aliens not eligible
• • 100 shareholders maximum
• • May only have one class of stock

Limited Liability Company

• • Formed under state law
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