What are the benefits of a corporation?

Brief Summary of Text

• Limited Liability – shareholders of the corporation are not liable for the debts and obligations of a corporation
• Ownership Easily Transferable – Ownership can be easily transferred by transferring shares
• Perpetual Existence -  The corporation exists even when the principal agents change
• Tax Advantages – Corporations have the ability to have tax deductions
• Raising Capital – Lenders are more willing to lend capital to a corporation

There may be many advantages to using a corporation to carry on business depending on your circumstances.  Some of the main advantages of using a corporation to conduct business include the following:

• Limited Liability:  The owners, or shareholders, of a corporation are not liable for the debts and obligations of a corporation. This means that, as normal rule, creditors of a corporation cannot hold the shareholders responsible for the debts of the corporation.  If the corporation cannot pay its creditors, then the creditors have no right to claim payment from the shareholders.  There are exceptions to this general rule either by statute or because of some act done by the shareholders to make them personally liable.  . If you concerns about these exceptions, you should seek legal advice.
• Ownership Easily Transferable:   Ownership of a corporation is transferred easily by transferring the shares.  It can be as simple as endorsing the back of the share certificate in favor of the new owner of the shares.  The change of ownership is then recorded in the records of the corporation.  However, if the corporation is actively carrying on business, the new owners will require various representations and warranties both from the seller of the shares and from the corporation.  The seller will also wish to exclude liability in certain areas and limit the representations and warranties given.  Also, certain technical requirements of the governing legislation must be met.
• Perpetual Existence:  Since a corporation is a separate legal entity from the shareholders, the corporation can have perpetual existence.  It continues as a corporation in law even if the ownership of the corporation itself changes.  This provides for continuity for  the business of the corporation.
• Tax Advantages:  Under United States income tax laws, there are tax advantage to operating a business through a corporation as opposed to a sole proprietorship, a partnership or some  other form.   If a corporation qualifies as a small business and has active income, then  it can take advantage of the small business deduction and pay income taxes at a substantially reduced rate.  There can be a substantial tax saving compared to doing business outside of a corporation..
• Raising Capital:   For a number of reasons, it can be easier to raise capital for a corporation than it is for a partnership or sole proprietor.  Lenders are more willing to lend capital to a corporation.  There are more sources of  capital for a corporation.

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