Classifications of Corporations

Corporations can be classified beyond just publicly held or privately held into specific categories based on various factors such as location, purpose, and structure.

Definition: A corporation that is incorporated in a specific state is referred to as a domestic corporation in that state.

Definition: When a corporation conducts business outside of the state in which it was incorporated, it is classified as a foreign corporation in the other states.
Example: WidgetCo is incorporated in Florida and operates in Georgia. It is a domestic corporation in Florida but a foreign corporation in Georgia.

Definition: A corporation that is formed outside the United States but conducts business within the U.S. is considered an alien corporation.

Nonprofit Corporations: These corporations do not have owners aiming for profits; their primary purpose is to serve the public interest (e.g., charities, educational institutions).
Benefit Corporations: These are for-profit entities that focus on specific societal goals while pursuing business objectives, like improving the environment or community welfare.

Definition: Corporations created by government bodies intending to serve the public, such as public transport companies. They do not have owners like traditional corporations.
Important Distinction: Do not confuse public corporations with publicly held corporations.

Definition: Ownership is limited to professionals within certain fields, such as lawyers or doctors. These corporations have strict membership criteria based on professional licensing.
Example: Law firms structured as professional corporations can only be owned by licensed attorneys who are active and in good standing.

Privately Held Corporations: The most common type, these do not sell ownership to the public and have greater flexibility in their operations.
- Advantages: They are typically less restricted by corporate formality and can use a unanimous consent resolution in lieu of formal meetings for decisions.
- Family and Closely Held Options: Privately held corporations can opt to become closely held or family held entities for even greater management flexibility.
- Revenue: Privately held companies can have substantial revenues, sometimes in the millions, without being publicly traded.
Publicly Held Corporations: These corporations sell their stocks to the public through initial public offerings (IPOs) and trade on stock exchanges like the NYSE.
- Regulations: Subject to rigorous federal and state regulations, including securities laws and corporate governance statutes (e.g., Sarbanes-Oxley Act).
- Scrutiny: These corporations are closely monitored by regulatory agencies due to the reliance of global investors on corporate integrity.

The classification of corporations reflects their purpose, structure, capitalization types, and operational objectives.
Understanding the distinction between private and public corporate structures is crucial for grasping corporate governance and regulatory environments.