What is a corporation?
A corporation is a form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability. The corporation may be a business, a non-profit organization or even a government of a new city or town.
The corporate structure is more complex and expensive than most other business structures. A corporation is an independent legal entity, separate from its owners, and as such, it requires complying with more regulations and tax requirements.
What are the advantages of forming a corporation?
Separate legal entity by the owner(s)
Profits are taxed separately from the owners’ personal income
Not dependent on the well being of the owner(s)
Owners not personally liable for debt or losses
Easier to get financing
Easier to establish employee benefits (retirement plans)
What are the dis advantages of forming a corporation?
Expensive to set up - includes fees to government agencies and probably legal fees.
Salary and dividends are both taxed
Annual tax rate is $800 minimum, whether company is earning or not.
Complex to set up – owned by stockholders; highly regulated by IRS and State Tax Boards
Must register with the State
You have less control
Complex to operate – more paperwork
Decision-making is complicated and less flexible