Corporate Tax - Corporation Defined

Corporation Defined

A corporation is a legal entity organized under the corporate or company laws of some jurisdiction. The jurisdiction may be a country or a subdivision of a country. For example, in Canada, a corporation may be organized under either Federal or provincial laws. Most jurisdictions recognize as corporations entities organized under the corporate or company laws of other jurisdictions. Under many tax systems, any entity providing limitations on the liability of all members for the actions of the entity is considered a corporation. Characterization as a corporation for tax purposes is based on the form of organization in most taxing jurisdictions. One notable exception applies for United States Federal and most state income taxes within the United states under which an entity may (with exceptions) elect to be treated as a corporation and taxed at the entity level or taxed only at the member level. See Limited liability company, Partnership taxation, S corporation, Sole proprietorship.

Governments may impose tax on corporations as separately from their owners. Most jurisdictions tax companies or corporations at the entity rather than the member level. Members of the corporate entity are generally not subject to tax on the entity's earnings until such earnings are distributed. By contrast, most jurisdictions tax partnerships at the member level and not the entity level. Members of a partnership are generally subject to tax on the partnership's earnings as they are earned rather than when they are distributed.