Corporations

Features of Corporations:

• Corporations have unlimited life as it is owned by stockholders and managed by employees, the death of a shareholder or an inefficient employee does not harm the continuous life of a corporation.
• Each and every shareholder has limited liability to the amount each has invested in the corporation.
• It is considered as a separate legal entity, conducting business in its own name.
• A corporation can easily raise its capital by selling stock or bonds.

Advantages of corporations are:

• Unlimited Life: The life of a corporation is endless as it is not affected by the death of a shareholder or an inefficient employee.

• Easy to raise capital: A corporation can easily raise capital by selling bonds and shares.

• Transfer of ownership: As the ownership is represented by number of shareholders, the transfer of ownership becomes very easy.

Disadvantages of corporations are:

• Difficult to form: A corporation is difficult to form as the cost for setting up a corporation is high and also it needs registration with the central regulatory authority.

• Double Taxation: In case of corporations there is double taxation. First of all the corporate income is taxed at a flat rate and then the dividends paid to the shareholders is taxed.

• Conflict: There may be a possibility of conflict between the shareholders and the directors.