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The benefits and drawbacks of establishing a corporation

On Behalf of | Mar 1, 2023 | Business Formation

When you launch an Oregon business, the way you incorporate that business impacts everything from how you run it to how you pay taxes for it. You have many different options available in terms of how you incorporate your business, but if you expect it to undergo rapid growth, you may want to consider creating a corporation.

Per Business News Daily, a corporation is a separate legal entity from a business’s owners. More formal than other types of business structures including limited liability companies, a corporation may make sense if you have hopes of growing your business on a global scale.

Understanding the benefits of corporations

Many business owners choose to establish corporations as a way to reduce their personal liability in the business. That way, if someone sues or secures a judgment against your company, your personal assets are not at risk. If you want to find investors for your business, a corporation is also a smart idea. Many investors like the structure corporations provide and prefer to put their money in these kinds of businesses. Ownership interests are also freely transferable in corporations, meaning corporations have the option of using stocks to fund their own growth.

Understanding the drawbacks of corporations

There are a lot of rules and considerable rigidity in running a corporation. There is also quite a bit of red tape. For example, when you run a corporation, you have to file specific formation docs with the state. You also have to follow strict reporting and bookkeeping requirements, which may prove costly year after year.

Whether it makes sense to establish a corporation depends on many variables, including how fast you want to see it grow and whether personal liability is a big concern.