(Governing Act – Companies Act, 1956 & 2013)

A  CORPORATE ENTITY is a separate legal entity that has been incorporated either directly through legislation or through a registration process established by law. Incorporated entities have legal rights and liabilities that are distinct from their employees and shareholders, and may conduct business as either a profit-seeking business or not-for-profit business.

A corporation is created (incorporated) by a group of shareholders who have ownership of the corporation, represented by their holding of common stock. Shareholders elect a board of directors (generally receiving one vote per share) who appoint and oversee management of the corporation. Although a corporation does not necessarily have to be for profit, the vast majority of corporations are setup with the goal of providing a return for its shareholders. When you purchase stock you are becoming part owner in a corporation.

Why Corporate Entity: 

(1)   All shareholders enjoy limited liability.

(2)  Ownership interests are freely transferable

(3)  Perpetual existence unaffected by the death of shareholders or transfer of shares.

(4)  Centralized management.

(5)   Business profits are subject to only one tax, at the individual shareholder level,and are not subject to double tax as would be the case if the profits were realized by a C Corporation.

(6)  Losses are available on the shareholders’ personal income tax returns and can  offset other income (subject to the at risk rules and passive loss rules)