S corporation vs. Corporation



S corporation vs. Corporation

Introduction

A traditional Corporation is considered as a business structure that is formed as an independent entity without any role of its owner and shareholders. Further, after its formations, the corporation has the opportunity to create their personal bank accounts, buy personal properties, free to conduct business across the state, and are also allowed to create their personal credit lines with suppliers, and other business entities (Cch incorporated, 2008).

Another important advantage of forming business as a corporation is that in case of any loss and liabilities occurred during the process of business that shareholders are not liable to pay of the liability and debt amount. In addition to this, a corporate firm must ensure the implementation of certain obligations like, election of president through proper election, frequent annual meetings, recording of minutes of annual meetings and others. However, the corporation has certain advantages and disadvantages like.

Discussion

Advantages of a Corporation

The prime advantage of the corporate firm is that it is incorporated without owners and shareholder, thus it contains limited liability of its shareholders, and a corporate firm gets relaxation in tax structure of the country. In addition to this, the firm has the opportunity to formulate its credibility, and has the opportunity to raise capital from different sources, and attract different investors (Epstein et al , 2010).

Disadvantage of the corporations

A corporate firm has certain disadvantages for instance it has to pay double taxes on its income, which means that after the corporation has pay its tax amount, the shareholders will also have to pay tax amount on overall income. Further, corporate it is imperative for the corporate firm to keep records of all its business transaction, and have to implement all the formalities of corporate laws (Stiengold et al, 2012).

S corporation

A corporation that is constructed with the aim of providing a pass-through entity for relief in tax purposes, which means that S corporation, is not included under the corporate taxation, and able to avoid the burden of double taxation. Another advantage of S corporations is that their dividends are taxed according to the marginal tax of their shareholders. Most importantly, shareholders of the corporation will pay the tax amount according to the overall income of the corporation, regardless of its distributions pattern (Staley, 2008).

Corporation and tax liability

The election of corporation has not gone well with some of the managers of the corporation, and there was pressure from upper management to provide complete explanation of the taken decision. Hence, as the chief financial officer of the Scuba view Inc, it was my responsibility to provide detail of my work to my coworkers, and senior managers. For this purpose, a meeting was called with a prime agenda of explaining the reasons of above decisions.

Before, presenting my point of view I thanked the management for believing in my capabilities, and honesty and assigning me this challenging task. However, I am completely aware of the complication involved with the corporate business, and tax difficulties, but assure that ...