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 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.