This type of general, for-profit corporation is referred to as a “C” corporation (referring to Chapter C in the IRS code). “C Corporation” merely refers to a regular, state-formed corporation. A corporation is owned by shareholders and is managed and controlled by the board of directors who elect the president and are responsible for the management and policy decisions of the corporation.
Limited Liability Companies
A limited liability company is a hybrid between a partnership and a corporation. Like limited partnerships and corporations, the limited liability company has a separate legal entity from its “members.”
There are several types of partnerships- general partnerships, limited partnerships, and limited liability partnerships. A general partnership is a form of business entity in which two or more co-owners engage in business for profit. There is no limit on the number or type of partners (i.e., individuals, other partnerships or corporations) to form a partnership. Generally, the business assets and business debts are jointly owned by the partners. The individuals involved are personally responsible for all debts and legal obligations of the business, including those incurred by the other partners when doing business on behalf of the company.
Most professional corporations qualify as personal service corporations (PSC) for federal tax purposes, provided that they also qualify under state law. To qualify as a PSC under Internal Revenue Service (IRS) rules, a professional corporation must be organized under state law and then pass two federal tests: the function test and the ownership test. The function test requires that substantially all (95 percent) of the business activities of the professional corporation involve services within specific occupations in the fields of health, law, engineering, accounting, actuarial science, consulting, or performing arts. The ownership test requires that substantially all the professional corporation’s outstanding stock be held directly or indirectly by qualified people, either: 1) employees who are currently performing professional services for the corporation; 2) retired employees who did so prior to their retirement; 3) or their heirs or estates. If a professional corporation organized under state law does not qualify as a PSC, then it is treated as a general partnership for federal tax purposes.
An S corporation combines the limited liability of a corporation and the “pass-through” tax-treatment of a partnership. It is a business structure suited to small business owners who want the continuity and liability protection of a corporation but wish to be taxed as a sole proprietorship or partnership.
Debtor-creditor law governs situations where one party is unable to pay a monetary debt to another. There are three types of creditors. First are those who acquire a lien through statute, agreement between the parties, or judicial proceedings against a particular piece of property. This property (or proceeds from its sale) must be used to satisfy the debt to the lien-creditor before it can be used to satisfy debts to other creditors. Once a lien has been created state statutory law governs how the lien is executed against the debtor’s property. The sale of property subject to a lien to satisfy the debt is also governed by state statutory law. The type of property that may be used to satisfy a debt is governed by state and federal legislation, such as the Consumer Credit Protection Act. Secondly, a creditor may have a priority interest. A priority arises through statutory law. If a creditor has a priority his debt must be paid ahead of other creditors when the debtor becomes insolvent. The third type of creditor is one who has neither a lien against the debtor’s property or holds a statutory priority.
Contracts are agreements that are legally enforceable. A contract may involve a duty to do or refrain from doing something, and the failure to perform such duty is called a breach of contract. The law provides remedies if a promise is breached- aiming to restore the person wronged to the position they would occupy if the contract had not been breached, rather than punish the breaching party.
The dissolution of a corporation is the termination of its existence as a legal entity. This might occur pursuant to a statute, the surrender or expiration of its charter, legal proceedings, or Bankruptcy.
The dissolution of a partnership is the end of the relationship that exists among the partners as a result of any partner discontinuing his or her involvement in the partnership, as distinguished from the winding up of the outstanding obligations of the business.
A promissory note is a written promise to pay a debt. An unconditional promise to pay on demand or at a fixed or determined future time a particular sum of money to or to the order of a specified person or to the bearer.
A commercial lease is a detailed written agreement for the rental by a tenant of commercial property owned by the landlord. Commercial property differs from residential property in that the property’s primary or only use is commercial (business oriented), rather than serving as a residence. Commercial leases are often more complex than residential leases, have longer lease terms, and may provide for the rental price to be tied to the tenant business’s profitability or other factors, rather than a uniform monthly payment (though this is also quite ordinary in commercial leases). A “triple net” lease includes both taxes and insurance in the rent.