Types of Corporations

2. Types of Corporations

Corporations fall into four broad classifications;

1. A public corporation is one created for public purposes only. It is connected with the ad­ministration of the government. Examples are states, school districts, municipal corporations, and countries.
2. Quasi - public is a term applied to corporations that are not strictly public in the sense of being organized for governmental purposes. Quasi - public corporations operate by contribu­ting to the comfort,convenience,and welfare of the general public. Examples are gas, water, e- lectric and other utility companies.
3. Private corporations are created for private purposes and are generally thought of as bus­iness entities carrying on activities for profit - making purposes. A profit - making corporation is primarily a business corporation organized with a view toward gains that are to be distributed a- mong members.
4. Non - for - profit corporations or organizations, which are created for or devoted to char­itable purposes or those supported by charity. Such as major charities, fraternal societies, the scouts as well as hospitals. In addition, they are classified as foreign or domestic, depending on where¹ the incorporation takes place or registered;

1. Foreign corporations are those organized in another state or country, while
2. Domestic corporations are ones organized within the state.

Private corporations may be further classified into;

1. Public traded corporations(i. e. "public held corporation" or the so - called" listed cor­porations" ), usually also belong to those private profit - making corporations. There are several kinds of securities(like stock,bond)being traded in the national securities exchanges and sub­ject to disclosure requirements of the securities exchanges and securities laws,and also subject to the administrative regulations of corporate democracy.
2. Closely held corporations( also called as" close corporations" or" privately held corpora­tions" ) contrast to the public traded corporation. The management of close corporations is simi­lar to that under incorporated partnerships, since it is managed by the owners of the close corpo­rations, in addition,the ownerships are focused on just a small group of very close people and their relatives. The scale of close corporations is quite different. In many states of the U. S. they axe equally subject to the corporation law under common law as the public traded corporations, but in some other states, there are regulations or stipulations specially acted to close corpora­tions. Some close corporations meanwhile belong to the Subchapter S corporations under the federal domestic tax regulations, which may enjoy the tax treatment as a partnership.

The fundamental distinction between the close (private) corporation and the public corpo­ration is that the close corporation is prohibited from seeking finance from the public by offering its shares or debentures to the public and it is a criminal offence for its shares to be advertised. The public traded corporation by contrast may seek finance in this way.

A further distinction between the public trade corporation and close corporation is now to be found in the corporation name. Thus,a public traded corporation must end with the suffix" public limited corporation,i. e. ,PLC" ,and a close corporation should end with the word"limit- ed,i. e. ,Ltd. "

Basically, the character of a corporation is determined by the object of its formation and the nature of its business. The character of a corporation may not be changed by calling it some­thing different from what is specified in its articles of incorporation. Because of this require­ment , one should make certain that the articles sufficiently describe and define the purposes for which the corporation is established.