2004-2-12
This is Bob Doughty with the VOA Special English Economics
Report.
Last week, we discussed ways that many small businesses are
organized. This week, we examine the structure of big business. The
most complex is the corporation. This kind of business organization
is designed to have an unlimited lifetime.
Investors in a corporation own stock. This is a share of the
ownership. Investors can trade their shares or keep them as long as
the company is in business. Investors may get paid dividends, a
small amount of money for each share they own.
A corporation is a legal entity, a being separate from its
owners. Shareholders are not responsible for the debts of the
corporation. Shareholders can only lose the money they invest in
stock. The corporation itself is responsible for its debts.
A board of directors controls the corporate policies. The
directors appoint top company officers. The directors might or might
not hold any shares in the corporation.
United States tax law recognizes two general kinds of
corporations. The first is known as the C corporation. C
corporations were the only kind for many years. Most pay taxes on
their profits. Shareholders also pay taxes on dividends they
receive. Some people call this "double taxation."
So, in nineteen-eighty-six, the government created the S
corporation. An S corporation is not taxed by the federal
government. It is like a partnership. It can pass its profits and
losses on to its owners. But S corporations cannot have more than
seventy-five shareholders. There are other restrictions as well.
The federal tax agency is the Internal Revenue Service. It says
that in two-thousand, about fifty-seven percent of corporations in
the United States were S corporations. Their number has grown each
year since the start. Yet they control only a small part of the
value of all corporations.
Not all corporations are traditional businesses that sell stock.
The American Red Cross, for example, is organized as a non-profit
corporation.
Corporations can be huge or not so huge. They may have a few
major shareholders. Or the ownership may be spread widely among the
general public. Incorporating offers a way for businesses to gain
the investments they need to grow. It also offers a way for the
investors to limit their responsibility.
This VOA Special English Economics Report was written by Mario
Ritter. This is Bob Doughty.