Corporations have an attractive advantage in raising capital for the business. Investors can invest and receive a percentage of ownership and some corporations raise money by selling stock.
Corporate Tax Treatment
Corporations file taxes separately from their owners. Owners of a corporation only pay taxes on corporate profits paid to them in salaries, bonuses, and dividends. In contrast, any additional profits are awarded a corporate tax rate, which is usually lower than a personal income tax rate.
Attractive to Potential Employees
Corporations can generally attract and hire high-quality and motivated employees because of stability. Depending on the corporation’s age and size, they often offer competitive benefits and the potential for partial ownership through stock options.
DISADVANTAGES
Time and Money
Corporations can be expensive and labor-intensive to start and manage. When incorporating, there are costs associate with this type of structure that is not required for other structures.
Double Taxation
In many cases, corporations are faced with two different taxes – one, when the company makes a profit, and two when dividends are paid to shareholders.
Additional Paperwork
Because corporations are highly regulated by federal, state, and local agencies, there are increased paperwork and recordkeeping burdens associated with this entity.
