Corporation Introduction – What is a Corporation & Pros and Cons of Being Incorporated

We will discuss the corporation for of business entity. As we think about he corporate form of business it is useful to make comparisons to other forms of business entities like a sole proprietorship and partnership. We also have other entities like LLC and S corporation. I think of business ententes in a similar way as a color wheel. We have the three prime components of sole proprietorship, partnership, and corporations and we have hybrids of S corporations and LLC. It is best to understand the prime components first, to know their pros and cons before considering how the hybrids are trying to get the best of each world. A corporate form of entity is is a separate legal entity. Being a separate legal entity means a corporation has more liability protections then other entities but it also causes problems like more paperwork to maintain and double taxation. In other words, the corporation must pay taxes as well as the owners, the stockholder when those earnings are distributed as dividends. The corporation is great for raising capital because it can sell stock. The owners of a corporation are stockholder. They have voting power to elect the board of directors who then hires management. For more accounting information see website.…


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