A corporation is an entity (usually a business) with the authority under law to act as a single person distinct from the shareholders who own it. Many different types of corporations exist, and they are generally classified depending on specific factors, which include:
- The business purpose of the corporation
- The manner in which the corporation’s income is taxed
- The number of shareholders and amount of stock to be issued
- Whether the corporation is incorporated to make a profit
Although there are a wide variety of corporation types, the most common formation types include:
- Business Corporation: A corporation formed to engage in commercial activity for a profit. Another name for this type is a "for-profit" corporation.
- C Corporation: A corporation whose income is taxed through the corporation rather than its shareholders. Any corporation that does not choose S Corporation tax status (see below) under the Internal Revenue Code is a C Corporation by default.
- Close Corporation: Any corporation whose stock is freely traded and is held by only a few shareholders who are often within the same family. The requirements and privileges of Close Corporations vary by jurisdiction.
- Controlled Corporation: A corporation in which the majority of stock is held by one individual or firm.
- Cooperative Corporation: A corporation primarily organized for the purpose of providing services and profits to its members rather than for a corporate profit. The most common kind is one formed to purchase real property (such as an apartment building), so that its shareholders may lease the apartments.
- Foreign Corporation: A corporation that is registered in one state, but is also “authorized to do business” in one or more different states. Usually created to take advantage of tax breaks and state incorporation laws. May also refer to overseas corporations doing business in the U.S.
- Non-Profit Corporation: A corporation organized for some purpose other than making a profit. Non-profits are typically granted special tax treatment.
- Private Corporation: A corporation founded by and composed of private individuals principally for a nonpublic purpose, such as manufacturing, banking, and railroad corporations (including charitable and religious corporations).
- Professional Corporation: A corporation that provides services of a type that requires a professional license. These are typically corporations made up of architects, accountants, lawyers, physicians, veterinarians, etc.
- Public Corporation: A corporation whose shares are traded to and among the general public. These are government-owned corporations that engage in activities benefiting the general public, usually while remaining financially independent. Such a corporation is managed by a publicly appointed board.
- S Corporation: A corporation whose income is taxed through its shareholders rather than the corporation itself. Only corporations with a limited number of shareholders can elect S-corporation tax status under the Internal Revenue Code.
A corporation whose charter has expired or been revoked, relinquished, or voluntarily terminated is called a dead or dissolved corporation. It can no longer legally operate as a corporation under the law.
Determining the exact type of corporation that you wish to form can be tricky, because there are so many different options available. A skilled corporate business attorney can help you to decide which type is best for your needs.