Corporations are, for tax purposes, separate entities and are considered a legal person. This means, among other things, that the profits generated by a corporation are taxed as the “personal income” of the company. Then, any income distributed to the shareholders as dividends or profits is taxed again as the personal income of the owners.

 

Advantages of a corporation:

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• Limits liability of the owner to debts or losses

• Profits and losses belong to the corporation

• Can be transferred to new owners fairly easily

• Personal assets cannot be seized to pay for business debts

 

Disadvantages:

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• Corporate operations are costly

• Establishing a corporation is costly

• Start a corporate business requires complex paperwork

• With some exceptions, corporate income is taxed twice