Chaganomics.com overview-corporation sole

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Chaganomics.com overview-corporation sole

  1. 1. Corporation Sole – An Overview “A corporation sole is one consisting of one person only, and his successors in some particular station, who are incorporated by law in order to give them some legal capacities and advantages, particularly that of perpetuity, which in their natural persons they could not have had. In this sense the sovereign in England is a sole corporation, so is a bishop, so are some deans distinct from their several chapters, and so is every parson and vicar.” -Black’s Law Dictionary, Sixth Edition, Page 341 Originally created to facilitate the orderly transfer of property belonging to a church or other religious society, a corporation sole is an official legal entity made up of a solitary incorporated office that is occupied by one person. Although most corporations sole still function in a religious context, today there are also political offices within Canada, the United Kingdom and the United States that hold this status. By passing the corporation sole directly from one office holder on to his or her successor with all of the rights and powers associated with that office still intact, the title and all of its assets are kept within the religious or political society. The death of the individual does not affect the office or its assets and no financial records are required to be kept, since no real profits are ever to be made. The only accounting that must be done is whatever is required by the religious or political organization itself. Unlike a corporation aggregate, a corporation sole can only be created by statute and does not have stockholders, owners or a board of directors. Instead, corporations sole are designed to keep property from being treated as part of the estate of the office holder and ensure that it belongs to the office itself. Similarly, creditors of the corporation sole are prevented from seizing assets belonging to the individual office holder and creditors of the office holder may not look to assets held by the corporation. 1
  2. 2. The Roman Catholic Church has typically titled its U.S. property to diocesan bishops who serve in the office of corporation sole, but in some more recent cases each parish priest serves as his own corporation sole, which also limits the total liability of each diocese and archdiocese. The Church of Jesus Christ of Latter-Day Saints (LDS) also uses a corporation sole for the U.S.-based office of its president. It is also important to note that this status is not always available for churches internationally. In the UK, for example, religious property belonging to the Roman Catholic Church is held by way of trusts. However, the monarchs are recognized in the UK as corporations sole, which distinguishes the property he or she owns from specific property that belongs to the title or monarchy itself. For example, Queen Elizabeth II has a number of corporations sole associated with her title, including Her Majesty the Queen in Right of the United Kingdom, Her Majesty the Queen in Right of Canada and Her Majesty the Queen in Right of Australia. In the U.S. all states recognize the legality of corporations sole under standard common law and 16 states have sets of specific guidelines that outline the conditions under which that state will recognize and permit a corporation sole to be filed. In these states, most religious societies and churches are eligible to file as corporations sole and no legal limitation can be set for any denominations. This is designed to promote equality and ensures that Buddhist temples, Jewish community centers, mosques and Christian churches may all qualify equally. In addition, some states also permit other non-profit organizations, such as educational institutions, cemetery societies, performing arts groups and scientific research groups to qualify for corporation sole status. Due to its inherent simplicity, this structural form can serve the needs of any political or religious society regardless of its size when set up properly. A corporation sole is very straightforward in its basic structure, since it has only one office and one office holder. In addition, by-laws are unnecessary and there is no board of directors to interfere with official business. In addition to the Roman Catholic Church and the LDS church in the U.S., major corporations sole in the UK include the Archbishop of Canterbury, the Archbishop of York, the Duchy of Lancaster, the Duchy of Cornwall, the Lord Mayor of London and the Commissioner of Police of the Metropolis. Corporations sole elsewhere include Minister of the Government for the Republic of Ireland, the New Zealand Public Trustee, Governor General of Canada and Iglesia ni Cristo, or Church of Christ, which is the largest entirely indigenous Christian organization in the Philippines. Over the course of the last decade, the Internal Revenue Service has warned of a corporation sole tax scam, issuing a consumer alert to advise taxpayers about the dangers of tax evasion schemes that misuse the law. According to the report, the scheme uses state and federal laws that are intended only for churches, religious institutions and certain political offices and has been marketed through $1,000-per-person seminars. 2
  3. 3. Promoters of the scheme encourage seminar attendees to apply for incorporation under the pretext of being in charge of a phony religious organization. They are told this is a “legal” way to avoid paying federal income taxes and other personal debts by placing assets in a tax-exempt entity such as the corporation sole. In essence, corporations sole are used to limit liability. This form of incorporated office is also established to allow for the easy management of all assets, finances and day-to-day operations of the entity, permitting select groups to operate without the strict formalities of a standard corporation. It is also important to note, however, that corporations sole do not provide any level of asset protection above and beyond what is provided by a typical aggregate corporation in the U.S. Finally, a corporation sole does not provide protection for assets that belong to the office holder, but it can help to contain liability for larger organizations, such as the federal government or church. It is also important to note that corporations sole do not have any special tax advantage in the U.S. and the IRS does not give them special treatment. All organizations must qualify separately under the 501(c)(3) requirements in order to obtain non-profit status. In addition, any money paid out by a corporation sole to its office holder must be reported in the U.S. as income and taxes must be paid accordingly. Chaganomics.com Libris.co Internationale Media Co. 3
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