Corporate Management & Control: How to Start a Business
In a proprietorship and in partnerships the owners and the managers of the business are the same people. How are ownership and management separated in corporations?
An S-Corporation is an independent legal entity that is given owned by shareholders. This means that the corporation itself is liable for its actions and debt, not the shareholders. Corporations have more legal responsibilities imposed on them and therefore more of a business structure for bigger companies. Ownership and control within a corporation are separated into shareholders, directors, and officers. A corporation must have at least one shareholders and a C-corporation can have an un limited number of shareholders. An S-Corporation however, is limited to 100 shareholders.
An S-corporation is defined as an election for corporations, under section S of the tax code. When filing MBNY Media, Inc. as a S-corporation, we had to file a charter document with the Secretary of State for New York State, under a name no one else in the State of New York is actively conducting business under. This established MBNY Media, Inc. separate from its sole shareholder, Daniyel Bingham, removing liability for debts and actions of MBNY Media, Inc.
It cost $150 in total, and the process was conducted online on the IRS website (IRS). Since an S-corporation was the chosen business structure, the IRS makes you register the business as a normal corporation first, and then you have 60 days to file a Form 2583, which informs the state that you have chosen to form your corporation under tax code S.
The formation of an S-Corporation is the same as it is with a C-corporation. However, the requirements for meetings and documents that a C-corporation will be required to present to officials quarterly, may be eased when it comes to a S-Corporation. Although, an S-Corporation is prone to more scrutiny from the IRS, when compared to the lesser requirements a proprietorship, partnership, or limited liability company (LLC. Historically, corporations have always been attached to larger companies, but in contemporary business, small businesses have opted for corporations more than ever. The benefits business owners seek lies in the way an S-corporation is taxed versus the double taxation a C-corporation experiences. Corporation owners as previously mentioned are called shareholders. Stock represents their share of interest in the business. Daniyel Bingham being the sole shareholder of MBNY Media, Inc., has complete and full ownership of MBNY Media, Inc., since I control 100% interest in MBNY Media, Inc.’s stock.
Management within a corporation is often broken down into three categories: management, board of directors, and shareholders. A corporation operating procedures and regulations in accordance with state laws, define the responsibilities of a corporation. All corporations are unique and different according to their industry but they all have government regulation and oversight. The management is made up of the Chief Executive Officer (C.E.O.), Chief Operating Officer (C.O.O.) and the Chief Financial Officer (C.F.O.) and their responsibilities as a collective is to manage the day to day operations of the corporation and assesses and mitigates the corporations risk and liability. The board of directors, have the companies vision and direction in mind, as they direct the management of the company. The board of directors will often implement committees and departments that make decision with the best interest of the shareholders in mind. Shareholders vote and decide on who is appointed to the board of directors and approve mergers and acquisitions that the company has planned.