Advantages of the corporate form (“C-Corporations”)

• One of the most important advantages of the corporate form of business structure is the potential limited liability of the founders of and investors in the corporation.  The liability for corporate debts is limited, in general, to the amount of money each owner has contributed to the corporation.  Unless the corporation is essentially a shell for a one-person business or unless the corporation is grossly undercapitalized or underinsured, the personal assets of the owners are not at risk if the corporation fails.  The shareholders stand by to lose only what they invested.  This factor is very important in attracting investors as the business grows.

  Translation: The owners and managers of corporations have no responsibility for their actions or how their income is created for them.  To use the Republican buzzword of the day, there is no accountability for rich folk.  On the other hand, the little guy can still be taken through the wringer even with the corporate laws of protection.

• Perpetual existence.
• Freedom of shareholders to sell, trade, or give away stock making the new owner of the stock a new owner of the business.  “This freedom offers potential investors a liquidity to shift assets that is not present in the partnership form of business.”
• Taxation: “Depending on many factors, the use of a corporation can increase or decrease the actual income tax paid in operating a corporate business.  In addition, corporations may set aside surplus earnings (up to certain levels) without any negative tax consequences.  Finally, corporations are able to offer a much greater variety of fringe benefit programs to employees and officers than any other type of business entity.”  In other words, people involved with corporations can get all kinds of income tax free.  And yet corporations are stingy with these fringe benefits toward the mass of low-paid employees.

buzzword

n.  A word or phrase connected with a field that is used especially to impress laypersons.

Created and Last Updated 2001-12-31