Why are most large businesses organized as corporations?

Most large businesses are formed as corporations because
of legal statutes that endow the incorporated form of business organization with full
entity status. What this means is that corporations, having full entity status, have
expanded powers of what can be exercise and limited range of
liability.

A corporation is endowed as a separate, legal
entity that has the rights of a "natural person." Corporations can buy and sell, enter
into contracts, instigate law suits (or be sued), form associations with or own other
corporations, own assets, pay taxes or be exempted from taxes, raise capital in the name
of the corporation (as opposed in the name(s) of private individuals with limited
credit-worthiness) (Sucha
S. Ollek).

While these attributes of corporations
benefit businesses of all sizes, large corporations benefit especially because these
attributes allow for growth from a small, private corporation to a megalithic and even
multinational corporation. In contrast, partnerships and sole proprietorships have more
boundaries to growth and growth potential. Kinds of corporations are C corporations, S
corporations and limited liability corporations.

The most
href="http://smallbusiness.chron.com/advantages-corporate-ownership-over-sole-proprietorship-59485.html">significant
attributes of corporations making them beneficial for and attractive to
businesses that aspire to becoming large businesses
are:

Limited liability:
Corporations are liable, as separate legal entities, for their taxes, debts and other
financial obligations. Thus owners and chief officers, who receive salaries and
perquisites, are not liable to cover corporate financial obligations from their own
wealth and
income.

Capitalization:
Corporations can more easily attain capitalization from banks than can sole
proprietorships or partnerships since they have the force of independent entity status
that is not complicated by personal credit history or family and personal finances. In
addition, corporations can attract investors and stockholders; they can even attract
venture capital for start-up or growth opportunities. Investors then share in the
profits thus are willing to invest under the limited liability corporate umbrella. Sole
proprietors cannot invite investors since, by definition, all profits must accrue to the
owner or to the partners in a
partnership.

Perpetuity:
Corporations are formed for perpetuity. They do not end upon the death of the owner or
partners as is the case with non-corporate businesses (though an unincorporated business
can be transferred over to a family member through a sale of the business).
Corporations, since they are not linked to any individual or individuals in partnership,
have a perpetual life and continue with renewed chief officers and board of directors
after the originator's
death.

Taxes: Corporations are
taxed differently from individual earners. Dividend income distribution from corporate
earnings are taxed at a lower rate than employment income. In addition, corporation
stakeholders pay fewer kinds of taxes than do owners of sole
proprietorships.