14 Interesting pros and cons of corporation form of business will be our core focus today. It’s important for you to know about types of business ownerships before knowing the pros and cons of corporation.
Corporation is a form of business ownership and if you unfamiliar with what it actually is, then you must have a quick look on next section. If you have already read our article about forms of business ownerships then you can skip the next section and directly move towards the pros and cons.
When it comes to corporation you must know that it’s about the shareholders. A corporation is a type of business in which multiple shareholders take part and enjoy limited liability and their involvement is limited too. In simple words, shareholders owned and possesses companies and handle their affairs. Starting a new business whether it is online or not and listing it as a corporation is not a good move.
Declaring your business corporation is appropriate if you are running a successful business with many employees working for you. Directors are appointed and they run the business for the shareholders. The profit is shared according to the agreement signed by everyone. The amount shareholders invest or put in the company makes sure how much share they will get. Corporation is considered to be one of the most complex and complicated business type in context of understanding the legal structure and tax requirements.
List of Corporation pros and cons
The advantages and disadvantages of corporation form of business are as follows and they should be given worth if you are looking to start your business as corporation.
Advantages of corporation:
- Potential of gaining quick success and growth with investors joining the company
- The corporation is so effective when it comes to consistency and continuity because if an owner or shareholder leaves the corporation or dies, the company continues to work just like before. Just few paper works needs amendments.
- Shareholders feels protected because creditors don’t go after them
- Corporation has got the right of doing free speech
- Corporation consists of a powerful hierarchal structure including directors, officers, shareholders and investors
- If corporation is an S Corporation, they have the advantage of not paying income taxes because profits and losses are all concerned with shareholders.
- Capital of a corporation can be easily raised by selling shares or by issuing bonds publicly
Disadvantages of corporation:
- Corporation’s biggest disadvantage known is double taxation as corporation pays income taxes as a whole. When shareholders got their share after division, they have to pay their individual income tax again.
- Extensive paperwork is required for different taxes depending upon the type of your corporation
- The more people and parties are involved, the more complex it gets. The same happened with corporation as many parties like shareholders, directors, officers, investors, workers and lawyers are included.
- More regulations from the state including tax regulations and insurance policies. Main reason is that large corporations have many employees working so legal problems like insurance can occur
- Many directors, investors and shareholders mean many decision makers and it’s beneficial but problematic at the same time as many contradictions may occur
- Time consuming is another demerit of corporation
- According to 5th Amendment no protection against self-incrimination
So, we conclude that corporation includes many parties and therefore can be complex and beneficial at the same time. Extensive paperwork is demanding and double tax is the biggest issue faced. More regulations are implied.
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