This contribution may be cash, promissory notes, real or personal property, services already performed, or securities. Shareholders are permitted to participate in the corporation's management. The withdrawal, death, or retirement of a shareholder does not trigger the dissolution of the corporation. The shares of stock in a corporation are securities. You should consult with an attorney experienced in securities law before planning to offer your corporation publicly.
Income is taxed at the corporate and at the shareholder level.
Stock dividends receive fairly unfavorable tax treatment by the Internal Revenue Service, and so are often avoided in smaller corporations, especially where the owners work daily in the company's operations and so can receive bonuses in prosperous years. Special allocations of tax items are made pro rata according to the extent of stock ownership. Shareholders may deduct subject to basis limitations, and the corporate debt is not included in calculating the basis. Distributions generally are not taxable to the extent of the shareholder's basis in his stock. The liquidation of a corporation is taxable at the shareholder level via a flow-through of the corporate items.