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What are the advantages of incorporation?

What are the advantages of incorporation?

A corporation is a company that is owned by its shareholders. The shareholders, who are comprised mainly of those who formed the corporation as well as individual investors, elect a board of directors to oversee the company’s activities. One instance where the shareholders do not participate is when the company is being held liable for its debts and any actions it takes that affect the business in an adverse manner. These situations are the responsibility of the corporation.

A corporate structure may well be the best way to open a business because the corporation exists separately from its shareholders.

Corporations are owned by their stockholders, who share in the gains and losses generated by the company, and have three distinct characteristics:

  • Legal Existence,
  • Limited Liability, and
  • Continuity of Existence.

What are the advantages of incorporation?

Limited liability:
potential loss limited to the amount invested in the corporation.

Perpetual existence:
corporation continues on after the death of the individual.

Tax advantages:
accountants will generally recommend incorporation once revenues reach a certain point.

Raising capital:
a corporate form of business organization easier to raise capital through the sale of shares.

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