ECON 308 Study Guide - Final Guide: Proxy Fight, C Corporation, Internal Control
Document Summary
There are 2 legal forms of organization: nonprofit and for-profit. A nonprofit organization prohibits persons who control the organization from receiving the organization"s residual profits. Residual profits must be used for the arts, education, or charity. They are exempted from federal, state, and local taxes. They must be financed through debt, internally generated funds, and donation. Nonprofit organizations cannot pay top managers equity-based compensation. Board members are typically community leaders and major donors. For-profit organizations have owners to receive the residual profits. Advantages of for-profit organizations are that they can gain access to capital funds from publicly traded equity markets and use equity based compensation to motivate workers. Pass through means business income would only be taxed once at the owner"s personal income tax level. S corporations were created in 1959 to help small business. The number of shareholders are limited to no more than 100.
