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%)