A corporation is a creation of the state because its life is depending on state lawsƒ¤. It does not exist any general federal corporation law that governs the structure and the function of private corporations, but there are several federal laws, such as securities laws, labor laws, antitrust laws, consumer protection laws, environmental protection laws and

bankruptcy laws. It is a separate legal existence that if it infringes or neglect the law it can be held criminally and civilly responsible. The Committee on Corporate Laws of the American Bar Association first drafted the Model Business Corporation Act(MBCA) in 1950 that was intended to provide a uniform law for regulations of corporations. In 1984, the committee completely revised the MBCA and issued the Revised Model Business Corporation Ac(RMBCA),that arranged the provisions of the act more logically, revised the language to be more consistent and made substantial changes in the provisions. Many states have adopted all or part of the RMBCA.Ĵ

Henry must take these essential steps if he wants to form this kind of business. In order his corporation to be elected as S , it must meet certain criteria. Stockholders must be US citizens or residents and the firms¡¦ profits and losses may be allocated only in the proportion to each shareholder¡¦s interest in the business. An S corporation shareholder may not deduct corporate losses that exceed his¡¨ bases¡¨ in his stock ¡Vwhich equals the amount of his investment in the company plus or minus a few adjustments and such corporations may not deduct the cost of fringe benefits provided to employee-shareholders who own more than 2% of the corporation. It also must have no more than 35 shareholders, only one class of stocks and it must be a domestic corporation which is a corporation in the state in which it was formed.

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