Question

List and discuss the advantages and disadvantages of Incorporating a business (Characteristics of Corporations).

Answer 1

The advantages of corporation form of business is :

1. A corporation is treated a separate legal entity and does not bind the members for any acts done by it.

2. It is easier in this form of business to raise money through financial institutions and public through stock exchanges.

3. Some corporations get additional tax benefits and may be expemted from tax as well.

The disadvantages of a corporation form of business are:

1. The formation of a corporation is a cumbersome process and involves multiple legal regulations.

2. Corporations are subject to constant monitoring by various government agencies which may hinder its free function.

3. Corporations with higher profits may be subject to higher taxes which in turn may result in lesser return to shareholders.