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Corporations in Maryland

In Maryland, determining if a company should be structured as a corporation depends on its commercial capabilities and goals. It is also important that a business choosing to incorporate is aware of the advantages and disadvantages of what becoming a corporation entails.

A corporation is an entity selection that is shareholder-owned and considered a legally separate entity. A corporation is solely responsible for its own debt and any incurred liability. Businesses with a larger number of employees often find incorporation to be a practical choice for business structure because it provides certain advantages.

Also known as limited liability, shareholders are not subject to legal action directly concerning a corporation and their personal assets are protected. Corporations also have the ability to increase capital by selling stocks. A corporation files its own taxes, separate from its owners. Typically, corporations are taxed at a lower rate than personal income. Additionally, corporations have competitive pools of prospective job candidates because of its ability to offer benefit packages, including the potential to own stock.

On the downside, creating and running a corporation cost a great deal of money and time. Corporations are also subject to two types of tax penalties: profits and dividends. Any capital gains and subsequent dividends are separately taxed. Strict monitoring by federal, state and local government means corporations must keep detailed records for verification, resulting in massive amounts of paperwork for further certification.

Due to state tax rates and rules affecting corporations, selecting a Business formation is a decision that should be made with prudent forethought in Maryland. A commercial law attorney could help business owners seeking organizational advice determine if forming a corporation is the best course of action for a company.

Source: United States Small Business Administration, "Corporation", November 02, 2014

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