Corporation :-

• The corporation definition is a legal form of business that protects its owners from losses greater than what is individually invested in the firm.

• A corporation is a legal entity that its owners control through shares. During the process of incorporation, prospective owners state how many shares they own.

• Corporations allow groups of people to work together to make a profit. One-person corporations allow owners to have a 100% share.

Types of Corporation :-

There are basically four types of Corporations -

1. C corporations
2. S corporations
3. Limited liability companies
4. Non - Profits

1. C corporations :- A C corporation (or C-corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. C corporations, the most prevalent of corporations, are also subject to corporate income taxation.

2. S corporations :- S corporations are those that pass corporate financials such as income, losses, credit and deductions through to shareholders for tax purposes. Similar to C corporations, this type of corporation follows the law of the state in which it resides.

3. Limited liability companies :- A limited liability company, or LLC, has elements of both a partnership and corporate structure. As the name suggests, this type of corporation provides limited liability to owners. LLC's have pass-through income availability in taxation and are often more flexible than a corporation.

4. Non - Profits :- Nonprofit organizations use surplus revenues as a means to achieve goals for a wide variety of causes. They use this instead of distributing them as profit or dividends. For self-preservation, expansions or other long-term goals or plans, nonprofits must retain themselves on their own.

Advantages of Corporations :-

• Builds Credibility - A corporate form of business organization is considered more stable than other forms of business organization. Also, when you set up a corporation, you can attract top talent in the market to grow your business rapidly. Hence, a corporation conveys the credibility of your business to suppliers, customers are other stakeholders of the business.

• Access to capital - Since most corporations sell ownership through publicly traded stock, they can easily raise funds by selling stock. This access to funding is a luxury that other entity types don’t have. It is great not only for growing a business, but also for saving a corporation from going bankrupt in times of need.

• Tax benefits - Although some corporations (C corporations) are subject to double taxation, other corporation structures (S corporations) have tax benefits, depending on how their income is distributed. For example, S corporations have the luxury of splitting their income between the business and shareholders, allowing it to be taxed at different rates.

Disadvantages of Corporations :-

• Complex Process - Setting up a corporation is a very complex process. It takes heavy paperwork to set up a corporate. The owners have to take lots of permissions from different regulatory authorities. Also, many norms of different regulatory bodies that a corporate must fulfill before it can start its business. For e.g., Sam will have to ensure that his business meets all the criteria set by stock exchanges if he wishes to list his business on. All this takes a long time to conclude which may demotivate the founders.

• Lengthy application process - Filing your articles of incorporation with your secretary of state can be quick, but the overall process of incorporating is often a long one. You will likely have to go through extensive paperwork to properly determine and document the details of the organization and its ownership.

• Double Tax - Till now, all the profits made by Sam’s business were his income and so he had to pay only a single tax on his income. But, as Sam comes to know, the owners and the promoters of a corporation are taxed two times on their income. Firstly, the corporation has to pay a flat Corporate Tax on its profits. And then the dividends received by the shareholders are taxed in their hands. This makes it less attractive for business owners to set up a corporation.

Let's conclude it :-