Advantages and Disadvantages of Corporation Company

Publish on February 24th, 2009 | Author: Admin

corporation companyThis is a short explanation about advantages and disadvantages of a Corporation Company.

Advantages of a Corporation

  • The shareholders have limited responsibility with regard to the debts or trials against the corporation.
  • Generally, shareholders are liable only for investment in shares in the company. (However, it is important to mention that managers could be subject to responsibility for their actions, such as not to retain and pay the taxes on their employees).
  • Corporations can obtain more capital through the sale of their actions.
  • A corporation can deduct the cost of benefits (benefits package) that offers to its managers and employees.
  • If you meet certain requirements, you can opt for declared as a corporation S. This selection allows that the company is subject to a payment of taxes similar to that of a society.

Disadvantages of a Corporation

  • The process of integration requires more time and money to compare to other models of organization.
  • The corporations are supervised and subject to rules of entities: federal, state and some local, and therefore might have to comply with many more requirements and administrative documents to demonstrate compliance.
  • The incorporation of a company could result in the payment of more taxes. The dividends paid to shareholders are not deductible as a corporate spending; therefore, that income may be subject to a double taxation.

Corporations Subchapter Type S.

It is only a selection for the payment of taxes, this option allows for a shareholder considers its revenue and profits as profit sharing allowing with this declaring directly in his personal statement of income tax. The peculiarity of this situation is that if the shareholder works for the company, and if it leads to a profit, it must be paid a salary, which must meet standards of “fair compensation”. The above may vary according to the geographic region, as well as to its occupation, however the basic rule is paid the same as you pay to a third party to carry out their work, if and when there is a gain enough. Otherwise, the IRS [Service Internal Tax of U.S.] may reclassify all revenues and profits as wages, which will cause which is responsible for the payment of taxes on the total amount of its payroll.

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