“Ok class. Turn your book to page 292 where we will be discussing what a corporation was. Back at the turn of the 20th century they were a happening thing, but by the end of the 22nd they were all but dead.” This could genuinely be a remark made by a future History teacher.
Remember that song, “Video killed the radio star?” In the same context, corporations used to own the world. Many still remain, though it seems like they no longer are fed by new growing companies. The idea of corporations having their own identity has created a sub-level group of beings who pitifully whine “but we’re people too!” And really, with the ability to own property and assets, they are. They even marry through merger. But, unlike their human constituents, they tend to generally have longer lives.
But, Uncle Sam has turned a blind eye on the race that it created. America, after all, was the beacon of capitalism and laissez-faire in our not so far off past. Now, things have changed, and it is the time of the company – the Limited Liability Company to be precise.
Consider the great American Corporation that was General Motors. In it’s filing of Chapter 11 Bankruptcy, it died, and gave birth to General Motors Company LLC. In it’s death, it lost some valuable assets such as Hummer, Saab, and Saturn. In it’s life, it gained many benefits as an LLC. This leads to how America has slowly murdered the Corporation, and turned its starry gaze to the Limited Liability Company (or LLC for short).
Perhaps it was the hatred of the rich that led the government to pass legislature limiting the rights and abilities of corporations. For example; you must be a citizen to hold stock in some corporations, and you must hold formal meetings. There are also limitations with taxation.
But, with an LLC, you get your choice of it all. Pass-through taxation allows shareholders to be taxed at the individual level (which can also be done as an S-Corporation). The company does not have to hold formal annual meetings as well. It gets to choose which option fits it best, and this is very beneficial. Individual members can also deduct losses on their taxes, which is not possible as a corporation shareholder.
The few negatives a LLC has are that owners must declare profits immediately, and that profits are subject to Medicaid and Social Security taxation. In many states, taxation on LLCs is harsher than for corporations. Both LLC members and S-Corporation owners are taxable with health insurance, parking, and group insurance. In this instance, Corporations are exempt.
It’s hard to say why dear ‘ole Uncle Sam has walked away from the corporations that carried him on their backs for so many years. America has a Robin Hood syndrome, of taking from the rich and giving to the poor. Taxing the rich is heard every election, and so now corporations are just changing into something new – a company.