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Advantages and Disadvantages of the Corporate Business Structure

Advantages and Disadvantages of the Corporate Business Structure

 

One of the first things you need to decide when you start a company is what type of business structure to adopt. The main ones include sole proprietorship, partnership, limited liability company, and corporation. This article will focus on the advantages and disadvantages of the last one.

 

The main advantage of the corporate business structure is the owner’s limited liability; you won’t be personally responsible for any debts or taxes that the company owes – you only need to worry about paying your income tax. As all assets belong to the company, you don’t personally put anything at risk.

 

As a corporation is independent of its owner or shareholders, it could potentially last many decades; it is your chance to leave a legacy. The corporate business structure is immune from such eventualities as the death or withdrawal of any of the shareholders. The corporate form safeguards the possibility of merging your business with other.

 

Unfortunately, the corporate business structure has also many disadvantages. A corporation is the most expensive form of running a business and it must comply with more regulations than a sole proprietorship of partnership. As the corporate taxation system is complicated, you may need an attorney or an accountant to help you sort out the paperwork.

 

A corporation is normally subject to double taxation. The corporation must pay tax on any profit it makes, and the shareholders must pay income tax on any dividends or salaries they receive.

 

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The corporate business structure has both advantages and disadvantages. The main advantages are the limited liability of the owner and a corporation’s long live. The drawbacks include high costs, double taxation, and the amount of paperwork a corporation must deal with.