Top 10 Reasons to Set Up a Corporation

The corporation has been described as one of the great inventions of mankind. An entity on its own, the corporation exists isolate from the personal fortunes of its founders, can pass from their hands intact, and may even outlive them. It pays its own taxes, can be sued in its own name and may have many owners in the form of shareholders over time.

There are many advantages of doing company in this structure. So, let's look at the top 10 reasons to set up a corporation.

Orchard Card Bank

1. Security from liability

This probably ranks estimate one among the top 10 reasons to set up a corp because of the minuscule liability that the corporate structure affords its owners. Theoretically, the corp is responsible for its debts and obligations. This advantage is not absolute though and has boundaries. The corporate veil may be pierced under unavoidable circumstances and shareholders of a new or small corp may be asked to give personal guarantees when trying to gain financing.

2. Capability to Raise Capital

One of the top 10 reasons to set up a corp is the increased Capability to raise capital, when compared to a sole proprietorship or partnerships. Face investors may be enticed by the tax benefits and minuscule liability offered by corps. The flexible nature of the capital structure in corps allows them to address a wide variety of investors with varying needs.

3. Selection of Tax Year

Tax law allows corporations (except S corporations) to freely pick their fiscal tax year, which may be distinct from the calendar year. The corporation can opt the tax year most advantageous to the company and most acceptable a fit to its natural company cycle.

4. company Continuity

This is not too unavoidable a advantage but de facto leading sufficient to be one of the top 10 reasons to set up a corporation. The corporation can survive its founders provided that it complies with state and federal regulations.

5. Centralized Management

Shareholders in the corp possess the right to vote for and decide the board of directors of the corp, who in turn elect the officers of the corp. This affords control.

6. Transferability of Ownership

In incompatibility to the other forms of company entity, the proprietary interest of a corp is de facto transferred. Barring any prohibitive deal among shareholders, or restrictions in the articles of incorporation or bylaws, shares of stock may be bought and sold freely.

7. Corporate Identity

Shareholders advantage from the sense of image and stability of a corp.

8. Tax Savings

Corporations are taxed at a lower rate than individuals. They can own shares in other corps and receive corporate dividends 80% tax free. This is de facto one of the top 10 reasons to set up a corporation.

9. Less Risk of Irs Audit

The probabilities of Irs audits on corporations are lower than on individuals, and disallowances are likely to be less.

10. Worker advantage Plans

The last, but not the least of the top 10 reasons to set up a corp, can be found in Worker advantage plans. The owners of a corp may be in a position to take advantage of any Irs-qualified Worker advantage plans that can be used both to compensate employees and to sacrifice the corporate wage tax liability. Payment to these benefits gives the corp a tax deduction and the shareholders may receive suitable tax treatment on the dividends arising from it.

Top 10 Reasons to Set Up a Corporation