| The corporation has been described as one of the | | | | enough to be one of the top 10 reasons to set up a |
| great inventions of mankind. An entity on its own, the | | | | corporation. The corporation can survive its founders |
| corporation exists separate from the personal fortunes | | | | provided that it complies with state and federal |
| of its founders, can pass from their hands intact, and | | | | regulations. |
| may even outlive them. It pays its own taxes, can be | | | | 5. Centralized Management |
| sued in its own name and may have many owners in | | | | Shareholders in the corp possess the right to vote for |
| the form of shareholders over time. | | | | and determine the board of directors of the corp, who |
| There are many advantages of doing business in this | | | | in turn elect the officers of the corp. This affords |
| structure. So, let's look at the top 10 reasons to set up | | | | control. |
| a corporation. | | | | 6. Transferability of Ownership |
| 1. Protection from liability | | | | In contrast to the other forms of business entity, the |
| This probably ranks number one among the top 10 | | | | ownership interest of a corp is easily transferred. |
| reasons to set up a corp because of the limited liability | | | | Barring any prohibitive agreement among shareholders, |
| that the corporate structure affords its owners. | | | | or restrictions in the articles of incorporation or bylaws, |
| Theoretically, the corp is responsible for its debts and | | | | shares of stock may be bought and sold freely. |
| obligations. This benefit is not absolute though and has | | | | 7. Corporate Identity |
| boundaries. The corporate veil may be pierced under | | | | Shareholders benefit from the sense of image and |
| certain circumstances and shareholders of a new or | | | | stability of a corp. |
| small corp may be asked to give personal guarantees | | | | 8. Tax Savings |
| when trying to obtain financing. | | | | Corporations are taxed at a lower rate than individuals. |
| 2. Ability to Raise Capital | | | | They can own shares in other corps and receive |
| One of the top 10 reasons to set up a corp is the | | | | corporate dividends 80% tax free. This is certainly one |
| increased ability to raise capital, when compared to a | | | | of the top 10 reasons to set up a corporation. |
| sole proprietorship or partnerships. Outside investors | | | | 9. Less Risk of IRS Audit |
| may be enticed by the tax benefits and limited liability | | | | The probabilities of IRS audits on corporations are |
| offered by corps. The flexible nature of the capital | | | | lower than on individuals, and disallowances are likely to |
| structure in corps allows them to address a wide | | | | be less. |
| variety of investors with varying needs. | | | | 10. Employee Benefit Plans |
| 3. Choice of Tax Year | | | | The last, but not the least of the top 10 reasons to set |
| Tax law allows corporations (except S corporations) | | | | up a corp, can be found in employee benefit plans. The |
| to freely choose their fiscal tax year, which may be | | | | owners of a corp may be in a position to take |
| different from the calendar year. The corporation can | | | | advantage of several IRS-qualified employee benefit |
| select the tax year most advantageous to the | | | | plans that can be used both to compensate |
| business and most appropriate a fit to its natural | | | | employees and to reduce the corporate income tax |
| business cycle. | | | | liability. Payment to these benefits gives the corp a tax |
| 4. Business Continuity | | | | deduction and the shareholders may receive favorable |
| This is not too obvious a benefit but certainly important | | | | tax treatment on the dividends arising from it. |