There are many different ways in which a business can be formed. When forming your own business, though, there are four main types to consider, each with their own pros and cons. For this post, we will answer “What is a Corporation?”
A corporation is the most easily recognizable
Advantages of a Corporation:
- Limited Liability for shareholders. Personal assets are protected (with some rare exceptions, i.e. fraud).
- Easily raise capital through the sale of stock. (You can also create multiple levels of ownership, as well as non-voting ownership).
- Transferring ownership is simple.
- Potential Tax Advantages. (Deductibility of employee health benefits, exception from certain individual taxes).
- Perpetual duration or unlimited life.
Disadvantages of a Corporation:
- Double taxation. (Profits are taxed first at the corporate level, then again at the personal level when that income is distributed to owners).
- Cannot elect to be treated as an individual for the purposes of taxation.
- Corporate Formation and Franchise fees required to be paid to the state.
- Required Corporate Formalities. (Meeting and record keeping requirements are strict).
A Corporation is an effective tool for business to expand, obtain larger investment, and take the business to the next level . Before forming a corporation, you should consult with a knowledgeable business attorney to go over the rules and requirements that you must follow in order to protect yourself. To speak with one of our business attorneys, please call (716) 853-1111 for a free consultation, or simply leave a comment below!