What are the advantages and disadvantages of a corporation when compared to other business entities?
The biggest advantage of incorporation is limited liability for shareholders. Under law, a corporation is considered to be a legal person that is distinct from the shareholders who own it. This means that individual shareholders are not personally liable for the debts and obligations of the corporation. If a corporation fails then the shareholders will only lose the amount of the purchase price of their original shares. One disadvantage of a corporation is that income is taxed at two levels: first on income for the corporate entity, and then at the shareholder level where shareholders are taxed on any dividends they have received.
A. The biggest advantage of incorporation is limited liability for shareholders. Under law, a corporation is considered to be a legal person that is distinct from the shareholders who own it. This means that individual shareholders are not personally liable for the debts and obligations of the corporation. If a corporation fails, the shareholders will lose the amount of equity invested with their shares. One disadvantage of a corporation is that income is taxed at two levels: first on income for the corporate entity, and then at the shareholder level where shareholders are taxed on any dividends they have received.