Business Structures 5 | The Biz Knows

Business Structures cont...

Corporations

Pros of Corporations

• A corporation is a legal entity that exists separately from its owner(s)

• The owners of the corporation enjoy limited liability. That is, owners of a corporation are not personally responsible for the debts of the corporation

• Can sell stocks and bonds which can generate additional capital

• The Corporation can continue past the death of the owners

• Ownership is easily transferable through the sale of stock

• Fringe benefits

Cons of Corporations

• The primary disadvantage of the corporate form is double taxation: the corporation pays taxes on any income and then when the corporation pays dividends to the owners (the shareholders), they also pay taxes on those funds

• Must file Article of Incorporation with the Secretary of State

• Must file paperwork with the Secretary of State every year and pay corporate filing fees

There are different forms of corporations including the C-Corp and the S-Corp. The subchapter C corporation has double taxation. The subchapter S corporation can receive pass through taxation treatment. But, the S-Corp. has other limits such as the number of shareholders. Please check the IRS website for the specific limitations.

Business structure example: Most Fortune 1000 businesses are incorporated. They can be either closely held or publicly traded.

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