General Corporations
A General Corporation is typically used when a business decides to go public or conduct private share sales. General Corporations are especially useful for raising capital and attracting investors. They consist of three layers of management: shareholders, directors, and officers, each with distinct responsibilities.
•Shareholders
Shareholders are the owners of the company, but they do not manage it directly. Instead, they vote on important matters such as electing directors and approving significant decisions. Shareholders with more shares, called majority shareholders, can exert control over the company, while minority shareholders usually have less influence but can sell their shares freely. Shareholders benefit from dividends based on the company’s profits and may see the value of their shares increase as the company grows.
•Directors
Directors are responsible for the company’s management and make significant decisions, such as setting business policies, deciding on share distribution, and overseeing company finances. They also determine whether dividends will be paid out to shareholders. Directors must act in the best interest of the company and cannot transfer their voting rights to others. They can be removed from their position by the shareholders if necessary.
•Officers
Officers handle the daily operations of the company and ensure that company policies are implemented. They typically include the president, vice president, and secretaries, though there may also be positions such as CEO or sales manager, depending on the company’s needs. Officers are appointed by the directors to serve the company’s operational needs.
Closed Corporations
Closed Corporations are generally smaller companies where shareholders, directors, and officers are often the same individuals. These corporations typically have a maximum of 30 shareholders and are not publicly traded.
•Management and Structure
Unlike General Corporations, Closed Corporations can operate similarly to partnerships. Shareholders may have more direct control over management and can outline specific rules for share sales and transfers in the company’s bylaws. In cases where a shareholder wants to sell their shares, other shareholders usually have right of first refusal, meaning they have the opportunity to purchase the shares before they are offered to an external party.
Key Differences
•Ownership and Control:
In General Corporations, ownership and management are separate, with shareholders owning the company but directors and officers managing it. In Closed Corporations, shareholders often manage the company directly.
•Number of Shareholders:
General Corporations can have an unlimited number of shareholders, while Closed Corporations are limited to a maximum of 30 shareholders.
•Flexibility in Management:
Closed Corporations enjoy more flexibility in management and decision-making, operating more like partnerships. In contrast, General Corporations follow a more rigid management structure.
Get Started with Your U.S. Business
Choose one of our services to help you start your business in the U.S. Contact us for further information or assistance.
Pre-sales inquiries? Call us at +1 302 310 21 76 (WhatsApp available!).
