CORPORATION (General) The Corporation is a separate legal entity, thus creating a more formal type of business. The owners of a Corporation are called Stockholders. There may be an unlimited number of stockholders in the company and their personal assets are protected from the claims of creditors of the business, in most situations. The liability that a stockholder has is usually equal to his/her investment in the Corporation. Advantages are: Owner's personal assets are not subject to claims of creditors. The Corporation can continue indefinitely, even if owners become ill or die. Tax free benefits to stockholders such as travel and entertainment deductions, retirement plans and life and health insurance. Ownership in Corporation may be transferred by sale of stock. A change in ownership will not necessarily affect the managers of the Corporation. It is easier to raise capital through the sale of stocks and bonds. Disadvantages are: It is more expensive to form a Corporation. More legal formality. There are more federal and state rules and regulations. Double taxation. CORPORATION (Close) A Close Corporation is very similar to a general corporation with a few exceptions. In the states which recognize close corporations, the number of stockholders is usually limited to between 30 and 50 owners. Additionally, if any new stock is to be sold, it must first be offered to the existing stockholders. This type of corporation is fitting for the individual who wants to be a one person corporation or for a small group of individuals who will all participate in running the company. This type of business structure allows the owners to operate similar to a partnership without having to maintain the formalities and record keeping of a general corporation. S CORPORATION S Corporations have basically the same advantages and disadvantages as a general or close corporation except that this form of business allows the stockholders to pass all profits or losses from the business through to them individually on their personal income tax return. Because of this, the S corporation pays no income tax and eliminates the problem of double taxation at the corporate level and individual level which exist in the general corporation. In order to be an S corporation, you must first form a corporation and then within 75 days of formation, you must file Form 2553 to elect S corporation status. The corporation must meet specific requirements before it is qualified to become an S corporation. These are as follows: Must be a domestic corporation; Maximum of 35 shareholders; Only one class of stock; Stockholders are limited to individuals; and Stockholders must be U.S. Citizens.