Advantages and disadvantages of corporations

The main advantage of a corporation is that its owners, known as stockholders or shareholders, have limited liability that means that they are not personally liable for corporate debts and liabilities. One major disadvantage of a traditional corporation is double taxation.

The second benefit of corporations is self-employment tax savings.

The third advantage of a corporation is its continuous life. The life of a corporation does not expire upon the death of its stockholders, directors or officers.

The fourth advantage is the fact that it is easier for a corporation to raise money by selling shares or creating new types of stock.

The fifth advantage is the ease of transfer. Ownership interests in a corporation may be sold to third parties without disturbing the continuous operation of the business.

There are also some drawbacks of the corporation. The first of these drawbacks is the higher cost. There are the initial formation fees, filing fees and annual state fees.

The second disadvantage is the formal organisation and the corporate formalities. These include holding board and shareholder meetings, recording minutes, having the board of directors approve major business transactions, and corporate record-keeping.

The third and final disadvantage is unemployment tax.

Company law and its sources in the uk

Company law is a branch of the much wider area of commercial law. It deals with the formation, operation and closing of companies.

A new area of company law in the UK arises out of the Companies Act 2006. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages. The Act was brought into force in stages, with the final provision being introduced on 1 October 2009. It followed the Companies Act 1985.

The Act contains various provisions:

• Company formation - the procedure for incorporating companies will be modernised to make it easier to incorporate over the Internet. It will become possible for a single person to form a public company.

• Constitutional documents - a company's articles of association will become its main constitutional document, and the company's memorandum will be treated as part of its articles.

• Corporate capacity - under the new Act a company's capacity will be unlimited unless its articles specifically provide otherwise, thus greatly reducing the applicability of the ultra vires doctrine to corporate law and removing the need for a long objects clause in the Memorandum of Association.

According to this Act, companies are explicitly required to act in the best interests of their owners (and not, for example, in the interests of individual directors), and to consider, when doing so, the impact of their actions on the local community, the environment, their employees, etc. Information on how they have complied with these requirements must be included in a report to shareholders. This Act has made it more difficult for companies to conceal their less attractive business practices, as such disclosures could damage their reputation and lead to a reduction in the value of the company (and may lead shareholders to try to change things). Inevitably, some people have complained that the Act imposes unreasonable restrictions on their ability to do business, while others complain that the Act doesn't go far enough to ensure corporate responsibility.