Question

What is the most important difference between a corporation and all other organizational​ forms?

Answer 1

Answer:

Separate legal entity and taxation process

Explanation:

In a corporation, unlike in other forms of business, the owners and business are treated separately under the law. This principle is referred to as separate legal entity concept.

So for any contracts or deals entered into by a corporation, the owners cannot be held personally liable or asked to make good the losses incurred due to entering into those contracts unless of course if owners acted with mala fide intentions to earn personal profits. In short, owners personal assets cannot be taken away.

Secondly, the taxation slab applicable to corporations is also different in the sense corporations pay taxes on dividend paid. Secondly, when such dividend forms part of the revenue of shareholders, tax is again paid on that dividend income, this time by the shareholder. So in a way, shareholders get taxed twice, since in the first case, the company paying dividend recovers the tax on dividend paid from shareholders. This is referred to double taxation.