It is essential to obtain proper business license once you decide to start your own company in Florida or any other state of the United States. Small business owners may obtain business license from state government. Legalizing business is required all over the world; no place is exception.

However, when small businesses expand and grow, business owners may like to form LLC or Corporation to get the advantages of those predefined business structures. Limited Liability Company (LLC or L.L.C.) and Corporation, both the structures offer some advantages and protect business owners from liability.

Mixed reaction is observed about Limited Liability Company and Corporations. Some people find LLC as more suitable for their business, whereas the others prefer to form corporation. The way of operation makes them different basically.

In the hub A Comparative Study Of LLC And Corporation, a relative study of both the business structures has been described. This hub compares Corporations with Partnership or Sole Proprietorship.

There are advantages and drawbacks in all the structures. It is not so easy to decide whether LLC, or Corporation or Sole Proprietorship is right for you. However, the comparative study helps you come closer to your decision and enrich you with knowledge. That is the main objective behind writing this hub. Let’s learn some of the merits of Corporations.

Stockholders in Corporation are free from corporate debts and liabilities:

This is the most talked about feature which makes Corporations so attractive. In sole proprietorship and partnership business, judgments, business debts and other liabilities go to each of the owners. In case a partnership business fails to satisfy the debts, corporate assets are used to repay the debts first. When corporate asset is not enough to compensate the liabilities, owner’s personal properties, assets and bank balance may be used to pay off the corporate debts.

Members of a corporation cannot be held liable for corporate debts generally. However, if the corporation fails to comply with corporate laws OR the members personally declare security of any debt, then creditors can go after members’ own properties to get their money back.

Tax Savings:

In sole proprietorship business policy, the entire earning of the owner is taxable. Self-employment taxation imposes tax on the income received from partnership or sole proprietorship business.

In case of corporation, only the salary is taxable, not the profit. So the amount earned from corporations, if divided as salary and profit, may not be taxable and the owners can save a lot of money that they otherwise had to pay for taxes.

Let’s now shift the attention towards Sole Proprietorship and Partnership business structure and its benefits.

Lower set up fees and running costs:

Establishing Sole Proprietorship and Partnership business is not much costly. Setting up a corporation is expensive. Even running cost is higher in comparison with that of Sole Proprietorship and Partnership. Different types of fees like preliminary formation costs, filing charges and yearly state fees are associated with corporations.

Lesser formalities:

Lots of formalities are involved with corporations starting from the very beginning. Legal papers, bylaws, articles of incorporation etc. need to be filed with state government. Arranging meetings of directors and shareholders, getting all corporate transactions approved by the board of directors, keeping record of each and every detail, maintaining corporate minutes etc. are essential for running corporations.

Whereas, sole proprietorship and partnership can run without any pre-written operating methods and strategies.

Both the forms have their own benefits. Set up and operation costs may be higher and the procedure may be difficult too, the benefits of corporations yet make it attractive for businessmen.