The business accounting financial statements produced for corporations are basically the same as the statements produced for the sole proprietorship, partnership in most areas. There are very few, if any changes in the assets and liabilities sections, it will be major changes in the equity of the section of the balance sheet. A corporation is very different from the other forms of organization. A corporation is a legal entity in itself, given a life in the state in which it is incorporated. Since the corporation has a life, it can be taken to court and can enter long-term contracts, which is impossible to do in the case of partnerships and sole proprietorships.
The advantages of incorporation include limited liability. This is very important because it limits the potential losses of the owners to the amount of their original investments. The advantage of the corporation is that it has unlimited life. The life of a sole proprietorship or partnership is limited to the lives of the owners. Another advantage of the corporate form of organization is its ease in acquiring capital. The corporation also benefits from professional management. The corporation is organized differently from the sole proprietorship or partnership in that management team runs it, and its owners are usually uninvolved in day-to-day management.
Disadvantages of the corporate form of business include double taxation, which can be a severe disadvantage. Since corporations are legal entities, they are required to pay taxes on their profits. Later when the profits are distributed to the owners as dividends, the owners must pay taxes again. The issue of taxation is a complex one; further discussion of it is beyond our scope. Then another disadvantage of the corporate form of business, Federal and state government agencies require many more reports of corporations than they require of other business forms.
The corporation is the form of business that pays taxes on profits. In sole proprietorships, partnerships, and LLCs, the owners pay taxes only on their personal tax returns.
Dividends are paid out of the companyâ€™s accumulated earnings and available to stockholders only when the board of directors declares dividends. There are four important dividend dates relating to cashing dividends.