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Laws Case

Essay by   •  December 6, 2012  •  Research Paper  •  1,537 Words (7 Pages)  •  1,169 Views

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One of the most sought after aspects of a corporation are the benefits they are initialed to as opposed to small businesses and partnerships; and when corporate benefits are identified and understood the corporate areas of law, business and society may also be found as well. These benefits include seven main or core opportunities that make transferring already established business into corporation easy while also promoting expansion and grow within the company. The benefits also make starting a new business easier and safer for ambitious individuals who want to change their occupation and possibly make a difference in their community. The seven main benefits are:

* Limited Liability,

* Tax Advantages,

* Establishing Credibility,

* Unlimited Life,

* Transferability of Ownership,

* Raising Capital,

* Retirement plans.

Limited liability gives the owner(s) and operator(s) of a corporation the protection and security of being excluded from or withdrawing personal responsibly for the company's debts and liabilities. "Creditors cannot pursue owners' personal assets, such as a house or car, to pay business debts," (Bizfilings, 2009). By offering individuals the protection of limited liability corporations can help to influence the business world through rapid and vast expansions of not only existing companies but also new companies not yet offered in a corporate market.

One of the most sought after benefits of any business are tax advantages. Due to their size and political influence corporations are generally offered a multitude of tax premiums, exclusions and rebates as incentives to grow and expand in hopes of providing more jobs and increasing living standards for the local communities. "Corporations often gain tax advantages, such as the deductibility of health insurance premiums paid on behalf of an owner-employee," (StartupNation, 2009). Some of these tax incentives include: deductibility of health insurance premiums which are paid on behalf of the owner(s) and the employee; self-employment tax rebates and premiums; income tax exclusion due from social security; workers compensation and Medicare; and expense deductibility on entities such as life insurance, capital machinery, and others business expenses. "Savings on self-employment taxes, as corporate income is not subject to Social Security, Workers Compensation and Medicare taxes," (Bizfilings, 2009).

Corporations also increase a business's credibility by offering security and accessibility to a company's stakeholders. "Incorporating may help a new business establish credibility with potential customers, employees, vendors and partners," (StartupNation, 2009). When a business seeks to establish credibility it needs to prove to its stakeholders it will be successful and provide a needed service or product that attentively and actively addresses scarcity in order to increase living standards. "Within the firm, managers make investment decisions regarding the types of products or services produced, as well as the way goods and services are produced and delivered," (financeforbasic, 2009). One benefit that enforces a business's credibility while providing sanctity and security to the business's stakeholders is unlimited life.

The idea of corporate unlimited life separates the business from its owner(s), just as limited liability also exploits, to make the business independent and self sustainable. "A corporation's life is not dependent upon its owners," (StartupNation, 2009). When an individual(s) starts a sole proprietorship or partnership the business takes on the individual's personal identification where it is subject to everything the founder(s) is subjected to. This means if the founder(s) falls ill so does the business and if the founder(s) or owner(s) die then the business will die as well because the business may only use the identification of its founder(s). A corporation, however, when approved and accepted by the government is issued its own personal identification such as a social security number, tax id, name and certificate of establishment. "A Corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes," (Investopedia, 2009). What this means is if for any reason the business owner(s) or founder(s) falls ill or experiences death the business, rather than die along with the founder(s), will simply find an executive replacement and continue its business operations. "A corporation possesses the feature of unlimited life, meaning if an owner dies or wishes to sell his or her interest, the corporation will continue to exist and do business," (Bizfilings, 2009).

Corporations also offer transferability of ownership where the owner(s) of a corporate business may sell, trade or resign the title of ownership to another individual(s). "Ownership in a corporation is typically easily transferable," (StartupNation, 2009). The transferability is most commonly executed through the process of buying, selling and trading a company's stock. Stock is the representation of an individual's ownership within a corporation and when stock exchanges hands from

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