The term "corporation" applies to associations of several people in a joint business effort. In this context, corporations do not necessarily require a corporate charter. Corporations have each of the following characteristics that make them different from other organizations:
Management is centralized. A certain number of associates, acting as a board of directors, controls the association regarding how business is conducted;
The organization continues uninterrupted upon the death of an owner or a change in share ownership;
The organization's members have the absolute right to dispose of their interests in the organization;
The organization intends to continue growing as a business; and
No associate is personally liable for debts incurred that exceed the organizations assets.
If an association meets these conditions, it is classifiable as a corporation. Therefore, members who perform duties similar to those of officers of a corporation are considered employees.
Partners are generally not employees of either the partnership or any of the partners of the business. However, a partnership can be classified as a corporation if it meets conditions (A) - (E) above. If a partnership can be classified as a corporation, partners who perform duties similar to those of officers of a corporation are considered employees.
Yes. Officers and employee-shareholders of S Corporations are employees of the corporation. Compensation for their services is wages paid by the corporation.
Last Revised: March, 2001