The Big Picture on Corporations

The word ‘corporation’ can conjure up some big images. Big business. Big expense. Big complexity.

While it’s true that forming your business as a corporation takes some extra pains, it comes with distinct advantages over sole proprietorships and general partnerships.  And it can actually prevent some of the worst headaches inherent in those business organizations.

A corporation is a separate legal entity that is owned by one or more shareholders, and formed according to state laws. Corporations themselves are responsible for the debt and obligations of the business. In most cases, the shareholders are insulated from personal liability for company debts and expenses.

That’s a stark contrast to sole proprietorships, which are owned by one person; are legally indistinguishable from their owners; and in which the owners are personally liable for business debts and expenses.

There are two main types of corporations:  ”C” corportions and “S” corporations. The structures differ in how income and expenses are reported, and how profits are distributed and taxed.

Here are the major factors to consider when deciding whether a corporate structure is right for your business.

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