Special Forms of Business
When an individual is thinking of starting or expanding a business, the first step is the type of business to register. Joan has the option of allowing two people to invest in her corporation and personally securing a loan to fund her business to go national. Since she is worried about personal liability that she might incur in the future, I would advise her to allow the two people to invest in her corporation. A corporation is an independent legal liability, which is owned by shareholders who make decisions. The costs of expanding the business to go national will be shared among the three shareholders, which will not be cumbersome as she could raise the capital alone (Ying, 2016). When the corporation incurs certain debts or illegal transactions, shareholders will not be held liable, as the corporation is legally independent. Shareholders’ properties would not be auctioned, or legal suit filed against them, as it would happen in the sole proprietorship business. The corporation tax rate is lower as compared with the individual income tax rate, which would be a favor for Joan investing in a corporation rather than a sole proprietorship.
Since corporations are considered “a person” in law, they should be held responsible for their criminal actions. When criminal activities are committed in a corporation, the corporation will be held responsible, but the shareholders or directors will be held responsible individually in such a case. A corporation is registered legally as a person. Since they are considered as persons, corporations will pay taxes and employ managers to oversee the daily operations (Ying, 2016). A corporate person can be held responsible as well as directors in a corporation. A corporate person can be working as a director, shareholder, or employee, and he/she cannot be held responsible for any criminal cases committed by the corporation. In such a case, a corporation only will be held responsible without affecting the corporate person, employees, shareholders, and directors.