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  • A corporation is a firm that exists as an independent legal entity, with ownership divided into shares. The owners of the shares are known as stockholders or shareholders. A key feature of the corporation is the limited liability. It means that the liability of the stockholders for debts of the firm is limited to the amount of money they paid to buy shares.
    There are two types of limited companies: private limited company and public limited company. There are a lot of differences between them.
    Private companies can not sell shares to the general public. They are often local family businesses and are common in the building, retailing and clothing industries. A private company can be formed with a minimum of two people becoming its shareholders. They must appoint a director and a secretary. If the company goes out of business, the responsibility of each shareholder is limited to the amount that they have contributed. They have limited liability. Such a company has Ltd. (Limited) after its name.
    Public companies can sell their shares to the general public (which they usually do at a stock exchange). A company continues to exist despite changes in its owners. The profits are distributed to the members as dividends on their shareholding. Losses are borne by the company. The management of the company is carried out by a board of directors. Many large businesses in the UK are public limited companies (Plc): Marks & Spencer, British Telecom.
    In the USA limited companies are called corporations. American companies have abbreviations Inc. or Corp. The owners of the corporations and the managers of the corporation are not the same people: the owners are shareholders, but managers may not be shareholders. The president of the corporation is called chief executive officer (CEO). He is responsible for the corporation and reports to the board of directors and shareholders. To register a corporation its founders must form a Charter. The state establishment approves it and gives a Certificate of Incorporation, and after that a company is considered to be a legal entity.
    Advantages of the corporations:
    -the responsibility of the shareholders is limited by the sum of money they are invested;
    -corporation doesn’t disappear if the founder\partner dies;
    -the rights and duties may be delegated;
    -distribution of the management skills;
    -using of the knowledge and experience of many people.
    Disadvantages of the corporations:
    -difficult to control;
    -the rights and duties of the shareholders are limited by the Charter, the interests of the minority are impaired;
    -they are strictly regulated by the law;
    -difficult to create and liquidate;
    -they are subjected to the double taxation: corporation tax (income tax on corporate net income) and individual income tax (on the dividend income).
    Private limited companies in the USA are called Close Corporations (C-corporations); however, the difference between private and public companies is not considerable in the USA, so the majority of the companies are called just corporations. According to the US tax code, there is a tax preference for the so-called S-corporations (small corporations having up to 35 shareholders): they pay only an individual income tax.
    1. What is a corporation?
    2. What does a limited liability mean?
    3. What is the difference between public and private limited companies?
    4. Where are shares sold and bought?
    5. Can you name the public and private limited companies in Russia?
    6. How are the limited companies in the USA called?
    corporations
    7. What can you tell about the difference between public and private limited companies in the USA?
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