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Advantages of a Corporation
- Limited liability of shareholders. In most cases, a lawsuit against your incorporated school can only attach the assets of the school, not your personal assets. This is the primary advantage to incorporation. Separate taxation of the corporation from its owners. Possible lower taxation rate.
- The corporation may sue and it may be sued in the corporation name.
- Using a corporation provides a more prestigious image associated with doing business. Perpetual existence of the corporation. The corporation can continue after the death of a shareholder or withdrawal of the shareholder by the sale of his/her shares.
Disadvantages of a Corporation
- Higher initial start-up formalities and cost. A corporation requires that articles of incorporation be filed, a head office designated, notice naming director(s) and officer(s) and a record book (called a "minute book") must be maintained which contains, among other information, details of meetings of shareholders and directors.
- Requires annual maintenance by an accountant and lawyer. A corporate tax return must be filed and the "minute book" must be updated. This is critical. Failure to maintain the corporation in this manner can result in a collapsing of the corporation, creating liability for you and your family in the case of a lawsuit or debt.
- Losses incurred during the start-up years cannot be used to offset income of the owner from other sources of income.