{"id":4862,"date":"2016-04-04T10:47:45","date_gmt":"2016-04-04T15:47:45","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/pros-and-cons-why-form-a-corporation.html"},"modified":"2025-10-20T23:43:00","modified_gmt":"2025-10-21T04:43:00","slug":"pros-and-cons-why-form-a-corporation","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/pros-and-cons-why-form-a-corporation.html","title":{"rendered":"Pros and Cons: Why Form a Corporation?"},"content":{"rendered":"\n
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Pros and Cons: Why Form a Corporation?<\/h1>\n\n
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\n By Jade Yeban, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

A corporation offers advantages like limited personal liability<\/span> from business operations and ability to raise funds by issuing stock. However, there are extra hurdles such as complying with corporate formalities<\/span> and avoiding double taxation<\/span>.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

Starting a business means making key decisions, with choosing the right business entity<\/span> being a significant one. For many entrepreneurs<\/span>, forming a corporation, particularly a\u00a0C corporation<\/span>,\u00a0is a top choice.<\/p>\n

Deciding whether to incorporate<\/a> is an important choice to make when starting your new business<\/span>. Other\u00a0types of business<\/span> legal structures<\/a>\u00a0include sole proprietorships<\/span>, partnerships, and limited liability companies<\/span>. As with any legal structure, corporations have certain advantages and disadvantages. Whether you decide to incorporate should be based on these factors and a careful analysis of the nature and needs of your business.<\/p>\n

This article will provide insights into what it means to form a corporation<\/a>, its benefits, and its potential drawbacks.<\/p>\n

Form your corporation with confidence with our trusted partner LegalZoom.<\/a><\/i><\/b><\/p>\n

Forming a Corporation: General Overview<\/h2>\n

When you form a corporation, you\u2019re creating a legal entity<\/span> that stands apart from its owners. There are several types of corporations<\/span>, with the\u00a0C corporation<\/span><\/a>\u00a0(C corp<\/span>) and nonprofit<\/span><\/a> corporations<\/span> being some of the most common. Each type has its unique advantages, tax implications, and requirements.<\/p>\n

To establish a corporation, you file specific paperwork, called the Articles of Incorporation<\/span>, with the state. The\u00a0Internal Revenue Service<\/a>\u00a0(IRS<\/span>) views corporations as individual entities. This means they are taxed at corporate <\/span>tax<\/span> rates<\/span>. Additionally, corporations need an\u00a0employer identification number\u00a0(EIN) from the federal tax body. Corporations must be diligent in their record keeping<\/span>. You can use your EIN to open a business bank account.<\/p>\n

You may also need to get a business license from the state, depending on the type of business<\/span> you operate. You will also need to\u00a0draft corporate <\/span>bylaws<\/span><\/a>\u00a0and appoint a board of directors<\/span>. Before making the decision to incorporate, however, you should understand the pros and cons of forming a corporation<\/span>.<\/p>\n

Pros of Forming a Corporation<\/h2>\n

There are several advantages of forming a corporation that attracts business owners<\/span>, including:<\/p>\n