Corporation Definition a Business Entity Essay

Total Length: 711 words ( 2 double-spaced pages)

Total Sources: 2

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However, liability is limited to the corporation and offers owners' limited personal liability, which is something that is not found in a sole proprietorship or partnership (Corporation: Definition, Formation, Maintenance, 2012). Furthermore, a corporation is also considered to be a stand-alone entity that has separate tax liabilities; as such, the corporation is responsible for paying corporate taxes on any of the profits the company makes, however, each employee is responsible for paying takes on the money that is paid to them in the form of a salary, commission, or dividend (Lorette, 2012).

Limited liability helps protect an individual's personal assets such as their cars, homes, and bank accounts should said corporation be sued by creditors when it cannot pay its debts and the corporation's assets are seized and sold to recoup money (Corporation: Definition, Formation, Maintenance, 2012). However, if it is determined that the personal and business dealings of a corporation are so intertwined that they cannot be easily distinguished from each other, a court may be able to "impose personal liability, or responsibility, on the active shareholders. Personal liability may also be imposed if the corporation does not comply with required legal formalities or fails to keep proper records" (Corporation: Definition, Formation, Maintenance, 2012).
Other disadvantages to a corporation include double taxation for C corporations, which is not applicable to S corporations. Also, the start up costs of forming a corporation and maintaining said corporation can be costly (Lorette, 2012).

While there are many different types of businesses, each has its own advantages and disadvantages. While sole proprietorships and partnerships afford owners personal freedoms, a corporation protects owners' from being liable in legal matters and also allows the business to continue indefinitely. Like any business, a corporation can opt to help the general public or be focused on generating profits for its shareholders and owners.


Corporation: definition, types, formation, maintenance. (2012). Retrieved 17 July 2012,


Lorette, K. (2012). Advantages and disadvantages of the corporate form of business.

Retrieved 17 July 2012, from

RMS Accounting. (2001). Different types of business entities. Retrieved 17 July 2012, from

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