Corporation
Why Incorporate Your Business?
Consider This:
Understanding the advantages and disadvantages of a copration will
guide you in selecting the right business structure for your business.
Unlike a sole proprietorship or partnership, a corporation is
difficult to form. Business owners must check with local government
offices on specific details on registering their business as a corporation.
Once the corporation application is approved by the government
the business will need to apply for and file a federal identification
number.
Advantages
The corporation is a separate legal entity. The corporation is
treated separately from the individual business owners.
Liability is limited. Individual owners will not be held
responsible for corporation debts.
Owners buy shares in the business, which are bought and
sold.
Stronger stability withing corporations. Death or illness of
a business partner/shareholder does not end the business.
Invertors purchase stock in the corporation which contributes
to long term corporate funds/stability.
A board of directors and officers manage and make all
decisions.
Board of directors members might have several different
backgrounds and a wide range of skills to add to the
business.
Disadvantages
Corporations are subject to
extensive regulation by the local and federal
government.
A corporations dividends affect tax returns
of corporations share holders.
Profits are subject taxation.
Forming a corporation is expensive and requires
professional help to incorporate.
Various taxes are imposed on corporations by government.
"Subchapter S" Corporations
Are a special form of corporate entity where they are allowed
to be treated like a partnership and the income taxed to the
shareholders. Other requirements must also be met.
In conclusion in selecting a legal structure for your business you must
consider:
-The nature of your business.
-What your goal is long term and short term.
-Will you seek investors.
-The cost to run or start the business under different structures.
-What legal structure will suit your business long term.
Always seek professional advice when selecting the
legal structure suitable for your business plan. Remember, most entrepreneurs
start out with a sole proprietorship which is easiest to start.
Later on you might decide to recruit partners or even incorporate.
(C) 2007-08 BB Lee
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