Most large businesses are organized as corporations because of legal statutes. Corporations have full entity status and expanded powers. Owners and officers are not liable for debts. Corporations can raise large capital by selling shares of ownership called stock. Shareholders own the corporation and can trade stock without affecting operations.
Corporations offer advantages like limited liability, financial resources, management, and continuity. However, there are some disadvantages to consider:
- Being time-consuming to manage
- Subject to double taxation
- Having rigid formalities and protocols
Corporations are typically managed to maximize value, with the intention of organizing large businesses within this structure.
Most corporations face double taxation, meaning business income is taxed at the entity level and the shareholder level. The only way around this is to operate as an S-corp, which only taxes shareholder income. However, the IRS monitors S-corps closely and may tax them as C-corps if records do not meet legal requirements.
Owners of a corporation are only liable up to their investments, and the corporate entity protects them from further liability. This is particularly useful when a business frequently takes on large risks.
Large firms can be more efficient due to economies of scale. However, excessively large firms may suffer from diseconomies of scale as they continue to expand.
Certain large corporations in North Carolina offer onsite job training, providing both an opportunity for skill development and a clear career path for employees.