Finance Specials

December 10, 2013

Tips on How to Establish a Corporation: Getting an Expert Corporate Advice

Do you want to set up a new business in Perth and you want it to be a corporation? Establishing a corporation will not be an easy task – there are forms to fill, concepts to think about, and positions to fill.

A corporation is a legal entity. Thus, it means that it is a separate entity from its owners, who are called stockholders. It exists as a virtual or fictitious person, granting a limited protection to the actual people involved in the business of the corporation. Even if a corporation pays income taxes, it is not allowed to hold public office or vote.

A corporation may be established as either a profit-making or non-profit organisation. It may also be publicly or privately held. The stock of a public company is traded on a stock exchange.

Unlike of a public company, stock of a privately held company is not traded on an exchange and there are usually only a small number of stockholders. There may be hundreds, thousands, even millions, of stockholders in a public company.

A corporation’s shareholders elect a board of directors (generally receiving one vote per share) who appoint and supervise the management of the corporation.

Advantages

The popularity of corporations is due to the following advantages:

* A corporation’s owners have limited liability towards the creditors. They are only liable up to their investment in the company. Therefore, in case of liquidation of the company, nothing is required to be contributed by the owners if the company’s assets are insufficient to meet the liability. Only the owners’ contribution is at stake rather than their personal assets.

* With perpetual existence, the corporation is considered a legal entity. It will stand until it’s liquidated. Death or change in ownership has no effect on the corporation.

* Additional capital can be raised easily through stock markets, etc.

* The number of share certificates held by a person represents the ownership. Therefore, this makes the transfer of ownership very easy.

Disadvantages

Below are the disadvantages of a corporation:

* To establish a corporation, you are required with the central regulatory authority and listing on a stock exchange which requires fulfilment of certain requirements related to the amount of capital, number of directors, etc.

* Before you own a corporation, there can be double taxation. First, the corporate income is taxed at a flat rate and then the dividends paid to the shareholders are taxed as well.

Now you understand all the basic things you need to learn, as well as the advantages and disadvantages corporations have, you may realise how difficult getting into or establishing one is very tough. Thus, you need some experts to help you – experts like corporate accountants.

Companies that run as corporations often seek help from corporate accountants because of the complexity of this business form. To learn more, visit the link above.

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Filed under Taxes by Mirco Jaramy

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