Corporations: Raising capital and distributing profits - YouTube video text script

Corporations are treated by the law as legal entities. That means, the corporation has a life separate from its owners and has rights and duties of its own.

The owners of a corporation are known as stockholders, or shareholders. A corporation can have one or many shareholders.

Corporations are typically managed by directors or officers, who may or may not be shareholders. Forming a corporation involves the transfer of money or property or both by the prospective shareholders in exchange for capital stock in the corporation.

For purposes of federal income tax, corporations include associations, joint stock companies, and trusts, as well as partnerships that operate as associations or corporations.

With the corporation business structure, stockholders have limited liability for corporate debts or actions.

Corporations may find it easier to raise capital and transfer of ownership, for example through sale of stock.

Tax is calculated at the corporate level. And when profits are distributed as dividends, that income is taxed at the shareholder level.

It is recommended to consult an accountant or an attorney specializing in corporate law, as corporations may be more difficult and expensive to organize than other business structures.

See Publication 542, Corporations, on IRS.gov for more information.