21 August 2011

Are corporations people?

Are Corporations People? When I first heard this story it was on an ultra-hippy liberal facebook friend's wall. My first (and lasting) reaction was, "Of course corporations are people." Since that point I have read many articles on the matter and have seen several snappy retorts attempting to discredit Mr. Romney for his opinion/observation. Most people are staunch in their declaration that corporations are not people. But then they continue on about the evil corporations and how they aren't doing their part blah, blah, blah...
So, armed with my laptop and good old Google I went on an information hunt. Looking at Webster's definition(s) I found that by definition corporations are in fact a group of people or a "person":
1:a : a group of merchants or traders united in a trade guild b : the municipal authorities of a town or city
2: a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession
3: an association of employers and employees in a basic industry or of members of a profession organized as an organ of political representation in a corporative state
Reference http://www.merriam-webster.com/dictionary/corporation
All of that aside I used my personal and business experience to come to the conclusion that corporations are people. When we started our business we were a C-corporation. This is probably the least 'people' oriented business I can imagine. The corporation is treated as it's own entity (person) and it is taxed, then taxes are paid on dividends and payroll through shareholders personal taxes. You get to tax the business separately with a C-corp. However, these corporations are becoming a dying breed. We were participant to that process.
We own two corporations currently. One is our retail store which is an S-corporation and the other is a real estate holding company which is an LLC. When we upgraded our accountant we upgraded our corporate structure to an S-corp. The biggest benefit to the S-corp is that the business income flows through our personal taxes eliminating the dual taxation. Our LLC company also flows through our individual (personal) tax return.
I could make a philosophical argument about how my business could not survive without me, my husband, or our employees (all people). I could say that all of the people in the company benefit from the business (are employed, get paid, IRA's, insurance, holidays, etc.) and that if the business paid more taxes (a la Obama) we would (and do) have fewer employees and the people that remain will have to settle for less if big brother takes more. This is the type of argument that seems to degrade most quickly, such as I am biased because I am the evil corporate owner, I just don't want to do my share, I'm the greedy one... never mind that it isn't just our livelihood on the line, it's also all of our employees. But, it is my house that is on the line as well as all of my other savings. My husband and I are the last to take a bonus in good years and the first to not get a paycheck if need be... but I'll stick to the simple tax facts.
I read that S-corporations are the largest growing corporation type and that much of this growth occurred in the 2000's by companies that converted (like we did). By 2006 over 66% of corporations were S-corporations. After five more years I'll be willing to bet that number has grown even higher. This means that those corporations are taxed through the shareholders personal tax returns. LLC's and C-corporations make up the remaining and LLC's are also taxed through personal tax returns of the owner's.
The bottom line is that both philosophically and with regard to taxation WE are our businesses. Unless you would like to try to make the argument that we are not people...

1 comment:

Jan said...

Owning a business should be a prerequisite to running for higher offices.