6 Advantages of a Corporation

There are numerous advantages to forming a corporation. In this post, our Sacramento business attorneys discuss 6 Advantages of a Corporation. If you'd like to learn more about corporations, please contact our business law firm or read more on our business page.

• Limited Liability. The debts of the corporation are separate from the shareholders. The shareholders only stand to lose the amount invested in the corporation. Any personal assets of the shareholders are protected; i.e., bank accounts, house, cars, stocks. There are circumstances when board members may still be liable. For example, mismanagement of corporate funds and undercapitalization.


• Investor Opportunities. Corporations provide outside investor opportunities such as venture capital and angel funds. Startups seeking possible investments in the near future should consider the standard business entity corporation. Startups and entrepreneurs seeking investment should also consider Delaware as an option.


• Corporate Formalities. Adhering to corporate formalities is generally seen as a negative; however, these formalities can ensure there is a structured approach to doing business. They establish a Board of Directors and create a formal process for doing business. For some individuals, this hierarchy scheme is welcomed and hierarchy can help establish credibility with customers.
  
  • A corporation may also elect to be "closely held." A closely held corporation can opt out of some corporate formalities, like annual meetings.


• Tax Advantages. A corporation may deduct health and life insurance premiums. Moreover, not all income is subject to social security, medicare taxes, and workers' compensation withholdings. Pre-tax deductions can make a huge difference during a long lifespan of a corporation.


• Corporation's Life. Corporations live forever, or until they are dissolved. Sole proprietorships, for example, are dependent on the life of their owners. If the owner dies, the sole proprietorship dies as well. Someone who owns an interest in a corporation may sell or transfer their interest at any time, and the business will continue to operate.


• Transferability of Ownership. Shareholder interests in corporations are easily transferred and sold.


• Employee Rewards. Ownership interest is a great motivating tool for employee productivity. Rewarding long-term loyal employees or providing new employees with vesting stock options over a period of time.

"Hired Trevor a few months back and he did a great job setting up my corporation and helping me with some contracts. he is a likable person and easy to work with. I know i've found a long term lawyer for my business. I will recommend him to any friend." - Miguel T

Before forming a business entity its advised to speak with a reputable attorney. There are financial ramifications of setting up any business entity, such as a minimum withholding tax of $800 per year and other local licensing costs. Its important to understand everything before forming an entity. Our business law office is located in Sacramento, California. Contact our law office to schedule an initial meetings to discuss the advantages and benefits of corporations. Please give our office a call if you're considering forming an entity or feel free to use our contact form.

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*There are many advantages and disadvantages to a corporation; however, this article is primarily focusing on some of the advantages of corporations. A corporation might not be the best entity for your particular needs and you should seek legal counsel for your specific situation. The information provided in this post does not constitute legal advice or opinion. The information is for guidance purposes only. Individual situations vary and you should contact us for a consultation. Sacramento's business attorneys discuss 6 Advantages of a Corporation.