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Types of Corporation

Types of a Corporations

The flexibility in the design of their own Corporation is increased for its founders by the different kinds of a Corporation. However, not everyone can choose anyone as the founder of their Corporation. Selection as to who can act for the Corporation, especially in their German homeland, is limited.  

Founders of companies in the U.S. may also choose to have, for example, a S or a C Corporation, which primarily is a decision with different tax consequences. 

The C Corporation pays taxes on the corporate level and also the incomes of the owners will be taxed. The S Corporation tax is virtually passed to the level of the company's owners and, therefore, at the corporate level, there is no income tax to be paid. For the establishment of a S Corporation there are some limitations such as the number of shareholders is limited to a maximum of 100; shareholders must be U.S. residents; its shareholders are not allowed to be other company entity such as a C Corporation or a Limited Liability Company (LLC). 

In general, it is not possible to say which type of Corporation is the better one for the company founder to choose. Generally they would have more freedom with the C Corporation than the S Corporation.  Whether this advantage would be lost by disadvantages which would affect them can only be decided on each individual case. 

There are other distinctions between corporations such as differences in an Open Corporation and a Closed Corporation. Shareholders of an Open Corporation may sell, without restrictions, their shares to third parties. However, the number of potential shareholders is limited. The Closed Corporation restricts the freedom of the shareholder on the sale of their shares. Their shares must first be offered to other shareholders and, only if none of the current shareholders want to purchase their shares, would they then be able to sell their shares to others.

The so-called Public Corporation is another kind of a U.S. Corporation. It resembles most closely the German stock corporation. Its shares are publicly traded and are usually owned by hundreds, or even thousands, of shareholders.

The sale/transfer of shares from existing/current shareholders to new shareholders is only permitted, if none of the other (existing) shareholders are interested in purchasing the shares.

ALTON assists its clients in selecting the appropriate type of Corporation and can assume all its formalities as well as those for the Limited Liability Company (LLC) should the client decide it be the business entity for their company. 

 

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