Corporate tax Essay Example | Topics and Well Written Essays - 1250 words

Corporate tax - Essay Example A corporation is structured in a way that its shareholders and stockholders are not held liable for any debts that the corporation may accrue. This fact protects a corporation’s shareholders from legal action or liability because of the identity of a corporation as a legal entity, for example, if a company defaults or slips into bankruptcy, the debtors will go after the company’s assets in order to recover their debt. If the company’s assets are not enough to cover the debt, legally the debtors cannot go after the directors, officers, or shareholders personal assets in order to recover their debts. This is the primary advantage of a corporation. There are many types of corporations, but in terms of taxation, there are two types of corporations. The two types refer to the special types of tax categories or elections recognized by the internal revenue authority. The two types of corporations are C and S corporations, and they have different advantages and disadvantages, and formulation processes. The formulation process of both types of corporations is similar, and it starts with filing at the state level before proceeding to the IRS. The structures between the two types of corporations are similar, and the two share a number of characteristics such as allowing shareholders, directors, and officers to separate their personal assets from corporation assets. The major difference between the two types of corporations is the taxing system attached to each. The taxation regime applied on S corporations sets many restrictions to the shareholders compared to shareholders of C corporations (Block 56). This election of corporations includes all the publicly traded or listed companies. It is the most common structure of a company found in the United States. This corporation is recognized as a separate legal entity, and shareholders’ own it. A C Corporation does not have a maximum number of shareholders because of its independent