One Of The Benefits Of Having A Closely Held Corporation Is Revenue Raising
https://youtu.be/MUzmLk889Hk
Video Transcribed: This is Isaiah Brydie with Urban Legal coming at you with another video. This video is all going to be on corporations and taxation of those corporations in the state of Oklahoma. We’re actually going to get into some brief overviews of the type of corporations that you can found in Oklahoma, and then there’s going to be a little sub-part at the end there.
Just going to a general corporation, like we said in a previous video, a corporation, it’s really, really easy to found. All you need to do is file your certificate of incorporation with the Secretary of State, with the appropriate filing fee and then you founded a corporation upon the proper filing of that certificate of incorporation.
We’ve said before about the things that you need to include in that certificate as far as registered agent, the address and the name of the corporation and all of those different kinds of things. Now going to the benefits of forming a corporation in the state of Oklahoma. Well, they’re readily apparent as far as with the selling of stock in the corporation.
You have a great means of raising revenue so that you can actually carry out the function and the purpose of that corporation. That’s the main benefit of forming a corporation is a raising of revenue. Now, that’s a double edged sword because on the flip side of that raising revenue benefit by the sale of shares, you have the detriment of you diluting your potential control and management of the corporation with your other shareholders.
As I said in an earlier video, the owners of a corporation are its shareholders so any substantial change to the corporation, the electing of the board of directors, the shareholders have a really substantial say in how the corporation is operated and controlled. On top of that, another detriment of having a corporation is that they are double taxed entities, meaning that there are taxed when they receive money through profits, and they’re also taxed again when they release dividends to the actual shareholders, so they’re double taxed.
Conversely from that, you have what’s called a closely held corporation. Now closely held corporation is a little different from a general corporation in that as the name entails, it is a corporation that’s closely held by a select number of individuals. In Oklahoma, you can form a corporation by just having one individual who owns 100% of the shares of that company.
They have 100% say so in that corporation. Closely held corporation could be more so summarized as like a family business. You know where you have three or four members of the corporation who are shareholders in the corporation. It’s only those four members and there’s only those four shareholders.
With those, the benefits of having a closely held corporation is again, revenue raising. While you might want to keep the corporation small, you can still sell shares to select few individuals and not en masse, and you can substantially decrease the level of dilution of your shareholders stake, and keep substantial control of the corporation yourself. The detriment of that is while you benefit by having more control, 
detriment could be that it could be seen that the corporation could potentially be an alter ego of you as an individual.
You might have some issues arise later on when it comes to piercing the corporate veil and corporation liability and you being held personally liable for the debts of the corporation.
But again, the the benefits tend to outweigh the risks in keeping that shareholder interest strong in yourself and being able to have a greater say so and control in who the board of directors they are, who the managers are and things of that nature.
A sub-part of a closely held corporation is what’s called a S type corporation. Now, an S type corporation is something that was actually formulated by the federal tax statutes. What an S type corporation is, is it’s generally a closely held corporation with no more than 100 shareholders to where it is taxed as a pass-through entity, a lot like a limited liability company is or a limited partnership is to where they’re only taxed at the distribution of dividends at the end of the year or whenever the board of directors deems it appropriate.
It’s a great way of getting around some of the tax detriments of a regular corporation or even that a closely held corporation may have. If you meet those criteria of having no more than 100 shareholders, then you should definitely do that. Again, the detriments are going to be the same as with a closely held corporation to where you could be, the corporation could be seen as a alter ego of the shareholder in that instance. Again, hope you guys liked that video. You can reach us at our information links to this video, and I hope to see you guys soon. Need an attorney? Give us a call at (918) 323-4334
