Question

Darrell inherited a large amount of money from his uncle. darrell wishes to start his own business, and his lawyers encourage him to make it a corporation. what disadvantage of a sole proprietorship are the lawyers trying to avoid?

Answer 1

Corporations provide two major benefits over a sole-proprietorship.

1. Corporations are taxed at a different rate than individual incomes. Sole-props are taxed altogether, which can create more tax burden for the owner.

2. Corporations assume all the risk and protect its owners' assets from damages. Sole-props assume all responsibility for the business and all their assets are subject to damages.