Question

A corporation is a legal entity. It is one of a few forms of business enterprises. Others are the partnership and the sole proprietorship. Discuss some advantages and disadvantages of forming as a corporation.

Answer 1

Answer :-

●Advantages

1. Ease of get $- sell more stock or issue bonds
2. Professional managers
3. Provides limited liability
4. Unlimited Life
5. Ease of transferring ownership

●Disadvantages

1. Difficulty and expense of getting a charter
2. Owners have little say
3. Double taxation
4. Lots of government regulation

Note :- (extra)Further deep analysis:-

●Advantages:-

• Limited liability. The shareholders of a corporation are only liable up to the amount of their investments. The corporate entity shields them from any further liability, so their personal assets are protected.

• Source of capital. A publicly-held corporation in particular can raise substantial amounts by selling shares or issuing bonds.

• Ownership transfers. It is not especially difficult for a shareholder to sell shares in a corporation, though this is more difficult when the entity is privately-held.

• Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass through many generations of investors.

●Disadvantages:-

• Excessive tax filings. Depending on the kind of corporation, the various types of income and other taxes that must be paid can require a substantial amount of paperwork. The exception to this scenario is the S corporation, as noted earlier.

• Independent management. If there are many investors having no clear majority interest, the management team of a corporation can operate the business without any real oversight from the owners.