Disadvantages of Forming a Corporation

Advantages and Disadvantages of forming a Corporation Advantages to Forming Corporation When a business sector forms, owners ask a decision as to the type of entity the business is to become. The owners aim to decide which form of business will best pillow slip their needs. However, when forming a corporation certain advantages exist that sole proprietors and partnerships do not have. Some of these advantages include being a come apart legal entity with limited liability, ease of generating capital and transferring self-control, miss of joint agency and continuous existence to name a few.

By having a business with a separate legal entity, the business is treated similar to how a person is treated. The business tramp enter into contracts, own dimension, sue and be sued in plus to hiring and firing employees. Since the corporation is a separate legal entity, all creditors that take action against the corporation can only carry out claims against the personal property that the corporation holds, not the personal property of the owners. Furthermore, because the corporation is a legal entity, the company is not touched by the death, incapacity, or withdrawal of an owner (Needles, Powers and Crosson, 2005).

Generating capital and transferring ownership is also easier for a corporation. A alter agency looks at the credit history and rating of the corporation, not the owners, when making lending decisions.



The corporation can issue stocks to generate capital resulting in many various owners in the company. Stockholders can buy and convey sh bes easily without affecting the operations of the corporation. Additionally, because the corporation has a lack of mutual agency, none of the stockholders can act as an owner by entering the corporation into a contract.

Disadvantages in forming a CorporationA corporation offers unique advantages and disadvantages. Just as there are advantages in forming a corporation there...

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