Series 79: Federal, State, And Municipal Governments

Taken from our Series 79 Top-off Online Guide

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Federal, State, and Municipal Governments

Federal, state, and municipal governments are business structures that need no introduction. Except in rare cases, a firm cannot choose to organize as a governmental unit.

Government entities do not issue stock, but they are prolific issuers of bonds.

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Common Business Structures

Entity Type

Attributes

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