10 advantages of corporation make these business organizations attractive to most investors, these being individuals and established companies.
10 Advantages of Corporation
1. Limited liability:
The owners, in this sense, have an advantage since they are not liable for any debts. Lenders cannot seize shareholders’ assets to recover corporation company debts.
Shareholders do not live in worry when a corporation is not doing great in its business operations. At least they are assured their assets and belongings are protected by the law even when their company is declared bankrupt.
For example, if you are a shareholder in a corporation, you do not have to constantly worry when your company’s financial health is not great. At least your car and your house will not be used to pay creditors. Your family is thus cushioned from creditors’ desperation to get their money back.
2. Long life:
Since the long life of a corporation does not depend on one shareholder, even the worst-case scenario of a core shareholder death does not attract the dissolution of a corporation.
As a shareholder, you do not have to worry about your equity invested in a corporation. The board of management established makes sure such a company goes through a smooth transition of leadership. The same applies during the exit of any shareholders. Unlike a partnership, where a partner’s withdrawal can result in dissolution, a corporation remains standing regardless of who has exited.
3. Easy transfer of shares:
Public corporations have straightforward share transfer policies. It is because they do not require approval from the board for shares transfer.
If you, as a shareholder, wish to surrender your shareholding of a corporation, you sell part or whole shareholding you have in a corporation. This makes the whole process of transferring shares relatively fast.
4. Professional management:
Owners and shareholders often appoint professional people who are qualified to run the company. These professionals ensure efficiency in the company. If you are a shareholder, you do not have to worry about such a corporation going under with your money.
Rest assured that the management is working for your money. This professional management monitors the external and internal environment for the consistent growth of a corporation
5. Many sources of capital:
These companies can easily access loans from external sources. This is because they have assets, and the ability to repay lenders is not in doubt. They also qualify for many loans because they pay high interest. For a business case, lenders prefer to lend to corporations more than a sole proprietorship.
A corporation can also sell shares in the stock market. They attract investors who, at times, commit a large amount of funds to the capital portfolio of corporations.
The ability to raise capital makes corporations find it easy to finance their operation for business growth. At least you can bet a corporation will grow with proper debt management. As a shareholder, this creates more value for your shareholding proportion.
6. Lower tax rates to owners:
Owners of a corporation enjoy some tax deductions as shareholders. For instance, medical insurance for the owners’ family members can be deducted.
In most states, corporations’ tax rate is lower than personal taxable income. Tax rates for personal income can start from as low as 10% to 35%, depending on the state and taxable income in question. However, corporate tax is quite average at about 25%.
Your state of residence could have different rates for taxing corporate and personal incomes. Try to familiarize yourself with the taxation environment of the state you live or do business.
7. More credibility to investors:
On incorporation of a business, it starts to be regulated by laws applicable to corporation form of business organization. In compliance with these laws, the business becomes more professionally managed.
Communication among owners is refined through committed systems. There is also the generation of financial statements for reporting to regulators, shareholders, and investors.
This responsive business entity is more credible to investors. Investors start to see investment opportunities and value that a corporation will add to their equity.
8. Ownership anonymity:
Sometimes you want to run your company without getting public attention. This is possible if you are an anonymous owner of such a corporation. Attaining anonymity is hard for sole proprietorship businesses. However, this is attainable in a corporation.
Anonymity allows you to delegate management duties and control the affairs of a corporation you co-own without questioning. Protecting the patent of your corporation and executing ts tax obligations is easy for you when you are anonymous.
9. Easy to establish an international brand:
Establishing an international brand as a sole proprietor would take you unnecessarily long. It might also be financially overwhelming in this long process.
If your desire to establish a successful international brand, a corporation form of business organization is among the best approaches. A corporation helps you enjoy a team of professionals in creating this global brand. These professionals you co-own a corporation with have expertise in different areas.
Some are good at international relations, others are outsourcing, and others are local and internal legal matters. Developing an international brand is thus relatively easy in a corporation.
10. Easy to build a portfolio:
Building a profitable portfolio expands the size of your business and its profitability. Even though you can build a portfolio in a sole proprietorship business, you are limited to the extent of what you can manage as a solo business owner.
In overcoming this barrier and creating a vast product/services portfolio, corporation business should be your solution. Take a company like Apple, for example. The company would not have excelled in establishing a profitable portfolio if Steve Jobs had decided to run the business as sole propretorship.
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