Many people want to set up a new business and they want it to be a corporation. However, starting a corporation will not be a simple task as many thought. That's because there are numerous forms to fill, concepts to think about, and positions to fill.
What's a corporation? Actually, a corporation is a legal entity. It means that it is a separate entity from its owners, who are called stockholders. It exists as a virtual or fictitious person, granting a limited protection to the actual people involved in the business of the corporation. A corporation pays income taxes but it is not allowed to hold public office or vote.
You can set up a corporation as either a profit-making or non-profit organisation, and can be held publicly or privately. The stock of a public company is traded on a stock exchange.
Unlike of a public company, stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders. There may be hundreds, thousands, even millions, of stockholders in a public company.
The shareholders of the corporation elect the board of directors (generally receiving one vote per share) who appoint and supervise the management of the corporation.
Advantages of Corporation
Businessmen opt establishing a corporation because of its advantages shown below:
* In case of liquidation of the company, nothing is required to be contributed by the owners if the company's assets are insufficient to meet the liability because a corporation's owners have limited liability towards the creditors. They are only liable up to their investment in the company and only the owners' contribution is at stake rather than their personal assets.
* Extra capital can be raised easily through stock markets, etc.
* Additional capital can be raised easily through stock markets, etc.
* The number of share certificates held by a person represents the ownership. Therefore, this makes the transfer of ownership very easy.
Disadvantages of Corporation
Below are the downsides of establishing a corporation:
* The central regulatory authority requires you to meet several requirements and listing on a stock exchange which requires fulfilment of certain requirements related to the amount of capital, number of directors, etc before you can set your own corporation.
* There can be double taxation with corporations - first, the corporate income is taxed at a flat rate and then the dividends paid to the shareholders are taxed.
Now you understand all the basic things you need to learn, as well as the advantages and disadvantages corporations have, you may realise how difficult getting into or establishing one is very tough. Thus, you need some experts to help you - experts like corporate accountants.
What's a corporation? Actually, a corporation is a legal entity. It means that it is a separate entity from its owners, who are called stockholders. It exists as a virtual or fictitious person, granting a limited protection to the actual people involved in the business of the corporation. A corporation pays income taxes but it is not allowed to hold public office or vote.
You can set up a corporation as either a profit-making or non-profit organisation, and can be held publicly or privately. The stock of a public company is traded on a stock exchange.
Unlike of a public company, stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders. There may be hundreds, thousands, even millions, of stockholders in a public company.
The shareholders of the corporation elect the board of directors (generally receiving one vote per share) who appoint and supervise the management of the corporation.
Advantages of Corporation
Businessmen opt establishing a corporation because of its advantages shown below:
* In case of liquidation of the company, nothing is required to be contributed by the owners if the company's assets are insufficient to meet the liability because a corporation's owners have limited liability towards the creditors. They are only liable up to their investment in the company and only the owners' contribution is at stake rather than their personal assets.
* Extra capital can be raised easily through stock markets, etc.
* Additional capital can be raised easily through stock markets, etc.
* The number of share certificates held by a person represents the ownership. Therefore, this makes the transfer of ownership very easy.
Disadvantages of Corporation
Below are the downsides of establishing a corporation:
* The central regulatory authority requires you to meet several requirements and listing on a stock exchange which requires fulfilment of certain requirements related to the amount of capital, number of directors, etc before you can set your own corporation.
* There can be double taxation with corporations - first, the corporate income is taxed at a flat rate and then the dividends paid to the shareholders are taxed.
Now you understand all the basic things you need to learn, as well as the advantages and disadvantages corporations have, you may realise how difficult getting into or establishing one is very tough. Thus, you need some experts to help you - experts like corporate accountants.
About the Author:
Businesses that are established as corporations often seek help from corporate accountants because the business form is naturally complicated. To learn more, visit the link above.
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