Insight

What is the best structure for my business? Corporations

A corporation is distinct from a sole proprietorship and partnership in one fundamental way: it is a separate legal entity. It has a legal existence independent from the owners of the business.

Corporations have 3 main groups of people involved: Shareholders, Directors and Officers.

What are the advantages?

  • A corporation provides limited liability for the owners (shareholders)
  • A corporate structure provides flexibility in the organization of the business
  • A corporation has a perpetual existence, so it does not end upon the death of one of the shareholders.
  • Control and ownership of a corporation are easily transferable by selling shares.
  • Corporations may facilitate access to capital because additional shares in the corporation can be sold to raise funds.
  • Corporations offer possible tax advantages compared to other forms of structures. 

What are the disadvantages

  • The costs of creating and maintaining the corporation can be very high.
  • Laws governing corporations are more complex.
  • Shareholders cannot use corporate losses to offset their personal income, unless Corporation is dissolved. (Then it’s 50%)