• What is a U.S. Corporation?

A U.S. Corporation or “Inc.” is a legal entity that is separate from its owners.

Stockholders or Shareholders own the business entity through their stock or shares.

A primary advantage of a corporation is that its stockholders are not personally liable for the company’s debts.

A corporation’s management are responsible for maximizing shareholder wealth, or stock price. They must balance the interests of shareholders, creditors, employees, suppliers, and customers and operate professionally and in accordance with their fiduciary duties.

When the entity is sufficiently profitable to make distributions, the Company Executives, or Board of Directors may declare that a dividend is payable to the stockholders, who are the Corporation owners, and are therefore entitled to receive a portion of the profit based on their percentage interest.

Also, in case the reader is wondering, “Inc.” is simply an abbreviation of “Incorporated”, which denotes the entity’s separate legal status.

• What are the different types of Corporations?

There are two different types of “for profit” corporations and both are largely differentiated by size and tax status.

They are:

• • C-Corporations (C-Corps): The most common structure for startups and large companies, such as Apple and Google. A C-Corp is so-called due to it being the default Corporation type under IRS rules (their income is taxed under “Subchapter C” of the US Internal Revenue Code); C stands for “Corporation”. Every corporation is a C-Corp, until it makes an election not to be.…
    

• • S Corporations (S-Corps): If a Corporation (C-Corp) makes an election to be treated (taxed) differently by the IRS, it makes what is known as an “S Election” to be taxed under Subchapter S of the Internal Revenue Code, making it a “pass-through” entity for tax purposes. Thereafter, it becomes known as an “S Corp” because it has elected to maintain its corporate status and the benefits of incorporation, whilst enjoying the tax-exempt privileges of a partnership. Typically, this is used by small businesses.
    

• How are Corporations created and regulated?

Each U.S. State has its own set of laws governing Corporations.

When the decision has been made to form a corporation, the next decision is to select a State in which the Corporation will be domiciled.

Corporations are entitled to be located anywhere, but can only be domiciled in one “home” state.

All corporations, private and public, are created in a specific State and will thereafter be regulated by the laws of that State.

Public corporations have an additional layer of corporate regulation, by the federal Securities and Exchange Commission (SEC).

• Why does Delaware get a special mention?

Corporations can be formed in all U.S. states, but one state prides itself on its “Corporate Hospitality”.

Most of our new incorporations are formed in the state of Delaware.

Delaware is the leading jurisdiction for publicly traded corporations in the United States. Some quick Delaware Stats:

– Nearly 1.4 million legal entities are incorporated in Delaware.

– Over 67% of Fortune 500 companies incorporated in Delaware.

– About 80% of U.S.-based IPOs (initial public offerings) are registered in Delaware.

– More than half of all U.S. publicly-traded companies are incorporated in Delaware.

There are always pros and cons, but if you are thinking, you cannot ignore the “first state”, Delaware.

• History

The first American corporations were developed in the 1790s, and textile corporations helped spark the Industrial Revolution in the U.S.A.

This was followed by the emergence and development of the steel, railroad, oil and automotive industries, which powered the USA into the 20th Century.

The boom of the inter-war years ended abruptly in 1929 when Wall Street “crashed”, causing the Great Depression and the era of corporate regulation and scrutiny was born with the creation of the SEC in 1934.

After World War II, Corporate America boomed and large conglomerates emerged in the latter 20th Century, eventually challenged by multinational Japanese companies in the 1980s and 1990s.

The past 30 years have been dominated by IT and tech corporations, especially in public markets, where the weight of the technology giants such as Apple, Microsoft, Nvidia, Google, Amazon and Meta, skews entire indices.

• Further information

To find out more about U.S. corporations, search the following resources:

• • U.S. Secretaries of State
    
  • SEC.gov
    
  • BBB.org�