Benefits--Risks

Benefits
• Liability rests on the corporation. The corporation is a separate legal
entity responsible and liable for its debts. It has an existence apart from the
people who own it. Its shareholders are liable only for the amount of they
have invested.
• Ownership is readily transferable. Stock can be purchased, sold, or
transferred. The corporation does not cease to exist with the death of an
owner.
• There is increased access to business expertise. The corporation
can draw on the experience and expertise of its board of directors, officers,
advisors, and managers.
• There is increased opportunity for raising capital. The corporation
can substantially increase its capital through the sale of stock.
Risks
• There is an increased tax burden. Income tax is paid on the corporate
net income (profit). Individual salaries and dividends are also taxed.
• Corporations are difficult – and expensive – to form and
maintain. Some of the costs unique to corporations are the fees for setting
up a corporate structure, costs of holding stockholders’ and board of directors
meetings, increased costs for documentation requirements, and legal and
accounting fees.
• They must conform to extensive government regulations.
Corporations are complex to manage and highly regulated. Burdensome
local, state, and federal reports must be filed, and regular stockholder
meetings must be held.