McDowell Memo: Corporations, Non-Profits, etc.

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Today we will finish up our introduction to various types of business ownerships.

  • Corporations- these are the main stay of business as most of us have seen it portrayed in news and other media. A corporation is strictly a business that has filed to be able to sell shares or portions of it's company in order to raise funds, or to get tax advantages, etc. They are incorporated in a specific state, this is because certain states are where the business is located or because the state has advantages for the business(many are filed in Delaware) . A corporation can be closely held or publicly held. If it is closely or privately held all the stock is owned by one person or a family. If it is publicly held the shares are owned by may different citizens. This is usually the case with most corps. listed on the stock markets. Corporations must file quarterly tax and other statements with the state and federal governments and are regulated by numerous restrictions Advantage is that you can raise funds fairly easily , Disadvantage the paperwork and legal restrictions
  • Non- Profit Corporations- commonly call a 501-3C for the IRS code, but could be several other types . These corporations are a misnomer in that they are not about not making a profit , just that the profit always goes back into the corporation. The way a person profits is through a large salary, benefits, etc. Examples of these are think tanks set up to be non-profit but pay huge salaries to the principals to manage these tanks. Most non-profits are similar to the Boys and Girls Clubs, YMCA, Little League, etc. just a group of people that want to better their hometowns. Advantages is that they pay no tax , donations to them are tax deductible for the person donating, very little paperwork annually. Disadvantage is that it takes a great deal of time to get the status from the IRS and state, people involved are sometimes putting their personal credit , etc. at risk. 
  • Holding Companies- These are simply for Profit Corporations that own other corporations in order to insulate the actual owners from losses or hide the ownership of the business. 
  • Cooperatives- These can be both a for Profit and non-profit organization that is set up in that the employees and customers can buy into the coop and get the benefit of lower prices or other services. Typically these are in the food and power industry. Sometimes these are Corporations acting as an individual in joining together to profit from size advantages. 
Professional Corporations - this is simply where a professional person or persons incorporates the services and assets and liabilities of a person or persons for the purpose of avoiding loss in litigation and/or allowing the entity to continue on beyond the life of the principal and allow payments to family, etc.

So we have listed out the types of ownerships of business entities, next week we will move onto looking at how business management styles are derived and utilized. Hope these weekly memo documents are helping you learn the ins and outs of business.
Remember if you have any questions either enter into the comment section or e-mai me at mcdowellcharles517@yahoo.com . Thanks and have a great week. Chuck  

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