The Advantages of Business Organizations

Corporations offer the advantage of limited financial liability for the owners. This means that the owners of the corporation limit their liability to the investment made in the corporation. The corporation is a separate legal entity that has an indefinite life. The board of directors that represents the company´s stockholders pays taxes and makes the business decisions for the corporation. Shareholders have liability for business debts and obligations of the corporation only to the amount of their investment. Incorporating also allows a company to raise money by issuing stocks and bonds. Businesses organized in corporate form enjoy some tax benefits but, on the other hand, are subject to double taxation. Double taxation occurs with corporations because the corporation pays a tax on profits earned and then the owners or shareholders of the corporation also pay a separate tax on distributions from the company in the form of dividends.