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Many people want to set up a new business and they want it to be a corporation. However, starting a corporation will not be a simple task as many thought. That's because there are numerous forms to fill, concepts to think about, and positions to fill. A corporation exists as a virtual or fictitious person, granting a limited protection to the actual people involved in the business of the corporation. It pays income taxes but it is not allowed to hold public office or vote. A corporation is a separate entity from its owners, who are called as stockholders, because a corporation is a legal entity. A corporation may be established as either a profit-making or non-profit organisation. It may also be publicly or privately held. The stock of a public company is traded on a stock exchange. Unlike of a public company, stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders. There may be hundreds, thousands, even millions, of stockholders in a public company. Shareholders elect the board of directors (generally receiving one vote per share) who appoint and supervise the corporation's management. What are the advantages of a corporation? The popularity of corporations is due to the following advantages: * A corporation's owners have limited liability towards the creditors. They are only liable up to their investment in the company. Therefore, in case of liquidation of the company, nothing is required to be contributed by the owners if the company's assets are insufficient to meet the liability. Only the owners' contribution is at stake rather than their personal assets. * Extra capital can be raised easily through stock markets, etc. * Additional capital can be raised easily through stock markets, etc. * In a corporation, the transfer of ownership is very easy because the number of share certificates held by a person represents the ownership. What are the disadvantages of a corporation? Below are the disadvantages of a corporation: * To establish a corporation, you are required with the central regulatory authority and listing on a stock exchange which requires fulfillment of certain requirements related to the amount of capital, number of directors, etc. * There can be double taxation with corporations - first, the corporate income is taxed at a flat rate and then the dividends paid to the shareholders are taxed. Now you understand all the basic things you need to learn, as well as the advantages and disadvantages corporations have, you may realise how difficult getting into or establishing one is very tough. Thus, you need some experts to help you - experts like corporate accountants. For more expert advice about establishing or running a corporation, you can ask help from Baggetta & Co and for more info, you can check out www.tax-accounting-perth.com.au.
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