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Advantages and Disadvantages of Incorporation Example
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Advantages and Disadvantages of Incorporation Advantages Disadvantages Limited liability: The personal assets of the shareholders are not at risk to satisfy corporate debts or liabilities.
Potential tax advantages: If a "C" corporation, taxes are based on corporate profits at corporate tax rates, and profits do not increase the income of shareholders, except for salaries and dividends paid to owners.
Attract investors: The structure makes it easier to attract investments.
Attract employees: Ownership interest can be provided to attract employees.
Tax deductibility of health and insurance expenses.
Clarified management responsibilities: Corporate structure requires definition of responsibilities.
Perpetual existence: Corporation continues to exist until shareholders authorize dissolution or merger.
Transferable shares: Corporation continues to exist when shareholders die or sell their shares. Fees: Various fees are required for incorporation.
Formalities and paperwork: Laws require particular processes and steps to run the corporation.
Disclosure of names and officers and directors: Names of officers and directors are typically in the public record.
Dissolution: Formalities must be followed to dissolve the corporation.
Tax consequences: "C" corporations have potential double tax, corporate tax on profit, and personal tax on dividends paid. "S" corporations can mitigate such consequences.
Potential tax advantages: If a "C" corporation, taxes are based on corporate profits at corporate tax rates, and profits do not increase the income of shareholders, except for salaries and dividends paid to owners.
Attract investors: The structure makes it easier to attract investments.
Attract employees: Ownership interest can be provided to attract employees.
Tax deductibility of health and insurance expenses.
Clarified management responsibilities: Corporate structure requires definition of responsibilities.
Perpetual existence: Corporation continues to exist until shareholders authorize dissolution or merger.
Transferable shares: Corporation continues to exist when shareholders die or sell their shares. Fees: Various fees are required for incorporation.
Formalities and paperwork: Laws require particular processes and steps to run the corporation.
Disclosure of names and officers and directors: Names of officers and directors are typically in the public record.
Dissolution: Formalities must be followed to dissolve the corporation.
Tax consequences: "C" corporations have potential double tax, corporate tax on profit, and personal tax on dividends paid. "S" corporations can mitigate such consequences.