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What is a Small Business Corporation?

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  • Written By: Tess C. Taylor
  • Edited By: W. Everett
  • Last Modified Date: 04 December 2016
  • Copyright Protected:
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A small business corporation refers to an organization that is officially registered as a corporation and is owned and managed by an entrepreneur, several business partners, or a group of investors for the purposes of earning revenues through the sale of products or services. A small business corporation may also be known as a limited liability corporation, a C-corporation or an S-corporation, which are forms of organizations determined by the type of business or the preference of the parties involved. One quarter of all small businesses are registered as corporations. In many regions, the type of small business corporation required is determined by local laws and regulations relevant to the type of industry that is involved or the business that is to be carried out.

In a small business corporation, the founders are often also the investors and they each have a right to make the decisions and to claim a share of the earnings generated as a result of the activities of the business. In this case, the founding parties are often referred to as the co-owners, board members, directors, or the shareholders. Generally, the business leaders are in charge of certain areas of the business, have made a significant financial contribution to the organization, and may perform important duties or possess special skills that add value to the small business corporation as a whole.

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Sole proprietors and other forms of organizations usually choose to become small business corporations for a number of reasons. One of the reasons to form a small business corporation is to protect personal assets and personal finances from being linked to those of the business. Another reason is because of regional or national tax laws that may offer government incentives or tax credits for companies that become official small businesses. In many cases, entrepreneurs choose to form small business corporations to take advantage of additional funding sources, such as business loans and grants that are only available to small business owners.

There are many advantages and disadvantages of operating a small business corporation. The advantages include being able to better manage financial and human resources and limit personal risk. A small business is also more capable of providing a wider range of services or products by bringing on more parties to grow the venture and earn more clients in addition to obtaining additional capital from more investors, loans, and grants. The disadvantages of a small business are that the earnings must be spread out among all investors, plus there are additional tax laws and fees to be concerned with and more detailed record keeping required.

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