Types of For-Profit Corporations

To the uninitiated, the term “corporation” may seem synonymous with “company.” In reality, it is a specific term which describes a particular type of company that conforms to the following general criteria:

• Delegated control by a board of directors
• Investor ownership, in the form of stockholders (although there are also non-stock coroprations)
• Transferable shares of ownership, traded on open stock markets
• The limited liability of shareholders
• The legal personality of the body corporate, meaning that the corporation can sue or be sued under its own name

Corporations can be subdivided from here. Corporations may be large or small, local or multi-national.

For-Profit vs. Non-Profit

Quite simply, for-profit corporations attempt to make money for their investors (who, in actuality, are the owners of the company) by paying surplus, after-tax funds to the investors in the form of dividends on their shares of stock. Conversely, non-profit corporations use these funds to further the other goals of their organization.

Closely Held Corporation

A closely held corporation is one in which the shares are carefully regulated in terms of price and ownership. The corporation is usually held by a small group of businessmen, and these corporations tend to be smaller than those that are traded in an open market. While they tend not to be as large or as visible as other corporations, closely held corporations do have the ability to better respond to business crises, since they are directly controlled by their owners.

Public Corporation

Most of the world's largest and most familiar corporations are public corporations, in which the shares of stock are sold on an open market like the New York Stock Exchange or Euronext. Microsoft, ExxonMobil, and McDonald's are all excellent examples of public corporations. These corporations raise capital by issuing stock, and are run by a board of directors elected by the shareholders.

Contact Us

If you would like more information on types of corporations and the benefits of each, contact the Texas business lawyers of Slater, Kennon & Pugh Ltd.LLP by calling 512-472-2431.