A corporation is the most common form of a business entity. We briefly wrote about corporations in an earlier post, and if you have not read it, and want a brief primer - check it out here.
Corporations can vary widely from sole shareholder corporations to publicly held companies. Some key characteristics of a corporation include, but are not limited to, the following:
it is its own legal entity, separate and distinct from the person(s) who comprise its shareholders;
the limited liability of its shareholder(s). For example, a sole shareholder is not liable for the debts and liabilities of the corporation, nor is the corporation liable for the debts and liabilities of its shareholder(s);
the separate ownership and management; and
it has the powers of a natural person.
Some advantages of a corporation include, but are not limited to, the following:
limited liability;
tax treatment, including tax deferral;
transfer of ownership (easy to transfer shares);
raising capital;
shareholders alone cannot obligate the corporation, while individual partners can bind a partnership; and
perpetual existence, as an artificial person, a corporation never dies.
Some disadvantages of a corporation include, but are not limited to, the following:
increased cost in establishment and maintenance (compared to a sole proprietorship or a partnership);
double taxation (corporations pay tax on corporate income and shareholders pay tax when they receive dividends from the corporation); and
increased governance and formalities.
Before deciding to incorporate your business, ensure that a corporation is the best avenue considering the business structure, liability issues, tax and management considerations. If you want to explore your options, get in touch with us.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. Jaswal Law would be pleased to provide additional details or advice about specific situations, if desired. No part of this publication may be reproduced without the prior written permission of Jaswal Law.