The primary advantage of a corporate form of business is that a corporation is a stand-alone entity, which means you are not personally liable for the assets and debts of the business. Incorporating protects your personal assets from lawsuits, debt collection and other business issues that can arise.
The stand-alone entity also separates tax liabilities, which is another advantage. This means that the corporation’s taxes are separate from your personal tax liabilities. As a business owner, you are responsible for paying taxes only on the money the corporation pays you in the form of a salary, commission or dividends--this is on your personal tax return. The corporation is responsible for paying corporate taxes (at the corporate tax rate) on any profit the company makes. Another advantage of a corporate form of business is it does not die when its owners do. Because a corporation is its own entity, it lives on, even after shareholders (owners) decide to move on or dissolve the corporation or if the corporation merges with another company. It is easier to sell or merge a corporation because it is a matter of changing shareholders rather than having to establish an entirely new business.
One of the primary disadvantages of a corporation is the costs for running a corporate form of business. It costs money to incorporate with the state where the business operates. You can choose to hire an attorney or accountant to help you complete the incorporation paperwork, but it is not a requirement. If you incorporate directly with the Secretary of State, as of 2010, the fee ranges from $99 to $150. Beyond the initial incorporation fees, the corporate form of business also has ongoing fees associated with it. An annual report fee can range up to $150 a year for each year the corporation exists after the initial incorporation filing.
For C corporations, the corporation ends up paying taxes twice. First, when the C corporation turns a profit, it pays a...
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