What are the (dis)advantages of a corporation?
Advantages of a corporation: • Stockholders are not liable for corporate debts. Normally, shareholders, directors, and officers are not responsible for corporate liabilities (unlike a sole proprietorship or partnership). If the corporation suffers losses, the corporation itself must bear those losses to the extent of its own resources, and not the personal assets of the individual shareholders. Thus, the corporation protects the owner of a business against personal liability. This is the most important aspect of a corporation. If the assets of the sole proprietorship or partnership cannot satisfy the debt, creditors can go after each owner’s personal bank account, house, etc. to make up the difference. On the other hand, if a corporation runs out of funds, that is it. The corporation’s owners will not be on the hook. • Please note that under certain circumstances, an individual stockholder may be liable for corporate debts. This is sometimes referred to as “piercing the corporate veil.
