Determining Whether to Form a Business Or a Corporation
Definition: A business, by definition, is any organization or entity which sells products or services for a financial profit. The most important aspect of the definition is that, by definition, a business is “something that functions in pursuit of a profit.” This simply means that the business must be running in order for it to make money. In order for a business to stay financially healthy and successful, there must be a financial system in place. The money comes from somewhere, and it can be more than one way.
Many business professionals are not fully aware of the many resources they have available to them when it comes to business administration. Business management consists of many things, including legal aspects, accounting, marketing, and research and development. By utilizing all of these various components, business professionals can keep their businesses running smoothly.
Many people start businesses with the best intentions but quickly learn that running a business organization requires much more than hard work. In order to generate profits, the owners must turn assets, such as land and buildings, into money, by selling goods and services. Many people think that a sole proprietorship is the only type of business organization. While a sole proprietor is the most popular kind of business organization, there are actually several others.
One of the most common kinds of business organizations is a corporation. A corporation is a separate entity from its shareholders. Unlike sole proprietorships, there are usually no taxes or special treatments required for corporations, because they are considered income or wealth. Corporations are popular among many business leaders and have a long history of making profits, allowing them to offer high dividends.
An exception to this generalization is sole proprietorships. A sole proprietorship is a legal entity separate from its owners that exists solely for the owner’s benefit. Taxes may be paid only to the person who owns the business; therefore, taxes on profits are deferred until distribution. The majority of US citizens do not own businesses. If your goal is to achieve maximum personal profits without paying corporate taxes, then a sole proprietorship could be right for you. For most people, however, a corporation will be the best choice.
A corporation is simply an existing company that has many different owners. It can be run by one shareholder or by many shareholders. Corporations are able to obtain certain tax benefits through tax breaks and limited liability. Unlike sole proprietorships, corporations generally do not face bankruptcy or other financial difficulties and are also able to accumulate a significant amount of profits.