BUL3130 Assignment 4

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Jun 1, 2024

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Marsha-leeta Williamson BUL3130 Assignment 4 April 6, 2024 In a time where cleanliness is of great importance, the request for professional cleaning services has grown to an unmatched extent. The decision to create a corporation stands as a calculated step, giving a wide range of advantages and opportunities for ambitious entrepreneurs like me. Even if it’s cleaning commercial properties, revitalizing residential homes, or sanitizing office areas, my company has committed to providing quality and excellent service. With this, we’ll be reviewing some advantages of establishing this corporation, the consequences of incorporating, the process for incorporation, and the options for corporate financing. Advantages: Some advantages of a corporation are easy transfer of ownership, access to better capital, limited personal liability, tax benefits, and business continuity (Schooley, 2023) . Easy transfer of ownership means that through buying and selling of shares of stocks, corporations can easily transfer ownership. Compared to other business setups, a corporation has better access to capital because it can give stock to raise profit from investors, reinvest money into the business for expansion and growth, and borrow money from loans and bonds. Referencing limited personal liability, when it comes to a corporation, shareholders are usually not personally responsible for any obligations and debts of the company. What this means is

that if by any chance the company experiences financial difficulties or a lawsuit is filed against it, the shareholders’ personal properties are protected. Tax benefits depend on the kind of corporation. For example, S corporations and selective other structures may give pass-through taxation, while C corporations may have the ability to subtract expenses and employee benefits (Huston, 2022) . Lastly, for business continuity, corporations can limit the risk of being at a standstill due to any changes in ownership, incapacity of key people, and death because they have a perpetual existence. Consequences: Some consequences of incorporating can include cost, formality and complexity, and double taxation. Getting started and keeping up with a corporation can bring forth more expenses than other business structures because of legal expenses, continuous compliance costs, and filing fees. Compared to sole proprietorships or partnerships, corporations require more formalities and regulatory requirements. Filing articles of incorporation, keeping up with corporate records, and holding shareholder meetings are included in these requirements (Horvath, 2024) . Lastly, some corporations can face double taxation, where shareholders are taxed again on dividends they receive and the corporation itself is taxed based on its earnings. Process: The process of incorporating includes choosing a business name, something that corporates with the state regulations and is unique. Once that is completed the next step is filing the articles of incorporation; this is filed with the proper state agency, and it gives information surrounding the corporation’s purpose, governance, and structure. Then, appoint the directors, these will be the people who oversee the corporation. Next, the drafting of the

corporate bylaws would happen, this is done by outlining the internal procedures and rules for governance. After that is the issuing of stocks, initial shareholders would receive stocks in exchange for their capital investment. Lastly, obtaining the required license and permits, depending on the choice of business are license and permits required by the state, federal, and local levels. (Yeban, 2023) Options: Three available options for corporate financing are retained earnings, debt financing, and equity financing. Corporations can use their profits to reinvest back in the business for research and development, expansion, and other usage. They can also borrow funds by obtaining loans from financial institutions and banks or issuing bonds. Corporations also have the ability to sell shares of stocks to investors for ownership stakes in the company to raise capital. (Team, 2023) In conclusion, the decision to open a corporation is ultimately an important milestone in the growth of a business, providing a wide range of advantages as well as possible consequences to think about. Although the benefits of easy transfer of ownership, access to better capital, limited personal liability, tax benefits, and business continuity are compelling, it is important to consider them against double taxation, cost, formalities, and complexities.

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References: Schooley, S. (2023, November 8). Advantages and disadvantages of a corporation . Business News Daily. https://www.businessnewsdaily.com/15805-corporation-advantages-and- disadvantages.html Huston, H. (2022, September 13). S corp vs C corp - differences & benefits . S Corp vs C Corp - Differences & Benefits | Wolters Kluwer. https://www.wolterskluwer.com/en/expert- insights/s-corp-vs-c-corp-differences-benefits Horvath, H. (2024, February 15). Partnership VS Corporation: Key differences . Swoop US. https://swoopfunding.com/us/blog/differences-between-a-partnership-and-corporation/ #:~:text=A%20corporation%20is%20a%20legal,and%20double%20taxation%20on %20profits . Yeban, J. (2023, November 3). How to incorporate a business - findlaw . FindLaw. https://www.findlaw.com/smallbusiness/incorporation-and-legal-structures/how-to- incorporate-a-business.html Team, C. (2023, October 4). Sources of funding . Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/accounting/sources-of-funding/

BUL3130 Assignment 4

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