Advantages
- Access to resources: Corporations can obtain extra money more easily, which is especially needed at the beginning of the business. They can borrow from banks, sell stock, or issue bonds. This extra access to funds lets the corporation have a better chance of growth.
- Hiring Professional Managers: The owners of a business can hire professional managers who are more adept at managing the corporation's finances. With their expertise, the corporation will rake in higher profits.
- Limited Liability: Unlike sole proprietorships, the stockholders of a corporation will not be ruined if their business has great losses. The losses they face will only extend to the money they pay for their stock.
- Unlimited Life: If the owner dies, someone else, perhaps from the board of directors, will take over and the business will run as usual. As long as a business is still viable it can still run without its original owner.
Disadvantages
- Difficulty in Starting Up: Setting up a corporation is more time consuming, difficult and expensive. A law firm may have to be involved in setting up a corporation, and there would be a lot of paperwork involved.
- Heavy Regulation: Since corporations are public companies, the owners will have to make annual reports to send to whatever government agency is in charge of overseeing the sale of stocks. Since their stockholders represent a large percent of their corporation, the owners must send financial reports to the stockholders every now and then, and hold meeting with those stockholders. There are many regulations involved in corporations because in corporations, other people are involved other than their owners, and the government must make sure that they aren't being cheated.
- Double Taxation (which is the levying of tax by two or more jurisdictions on the same source of income, which in this case, is the corporation. The dividend income of the stockholders will be taxed as well.
- Less Control: As said before, there are many people involved in the running of a corporation. Since there are many people, the owners will not be able to make their own, unquestioned decisions for their company. If the board of directors decide against their decision, then it will not happen, whether for the good or the bad of the company.
- Access to resources: Corporations can obtain extra money more easily, which is especially needed at the beginning of the business. They can borrow from banks, sell stock, or issue bonds. This extra access to funds lets the corporation have a better chance of growth.
- Hiring Professional Managers: The owners of a business can hire professional managers who are more adept at managing the corporation's finances. With their expertise, the corporation will rake in higher profits.
- Limited Liability: Unlike sole proprietorships, the stockholders of a corporation will not be ruined if their business has great losses. The losses they face will only extend to the money they pay for their stock.
- Unlimited Life: If the owner dies, someone else, perhaps from the board of directors, will take over and the business will run as usual. As long as a business is still viable it can still run without its original owner.
Disadvantages
- Difficulty in Starting Up: Setting up a corporation is more time consuming, difficult and expensive. A law firm may have to be involved in setting up a corporation, and there would be a lot of paperwork involved.
- Heavy Regulation: Since corporations are public companies, the owners will have to make annual reports to send to whatever government agency is in charge of overseeing the sale of stocks. Since their stockholders represent a large percent of their corporation, the owners must send financial reports to the stockholders every now and then, and hold meeting with those stockholders. There are many regulations involved in corporations because in corporations, other people are involved other than their owners, and the government must make sure that they aren't being cheated.
- Double Taxation (which is the levying of tax by two or more jurisdictions on the same source of income, which in this case, is the corporation. The dividend income of the stockholders will be taxed as well.
- Less Control: As said before, there are many people involved in the running of a corporation. Since there are many people, the owners will not be able to make their own, unquestioned decisions for their company. If the board of directors decide against their decision, then it will not happen, whether for the good or the bad of the company.