What is a Corporation?:
A corporation is chartered by the state where it is headquartered and is considered by law to be a unique entity that can be taxed, it can be sued, and it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. Forming a corporation requires one to register a business name, file a certificate of incorporation or articles of incorporation and pay a fee.
Advantages of Corporation:
In a corporation, shareholders hold limited liability for debts or judgments against the organization. Corporations can raise additional funds through the sale of stock. A corporation may deduct the cost of benefits it provides to officers and employees. This business structure can elect S corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
Disadvantages of Corporation:
Forming a corporation can be more complex than that of a sole proprietorship or limited liability company. Not only does the process of incorporation require more time and money than other business structures, but corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations. Incorporating may also result in higher taxes. Dividends paid to shareholders are not deductible from business income; thus it can be taxed twice.
View other forms of business organizations in: Business Legal Structures
