What are the disadvantages of incorporation?

What are the disadvantages of incorporation?

A corporation is a company that is owned by its shareholders. The shareholders, who are comprised mainly of those who formed the corporation as well as individual investors, elect a board of directors to oversee the company’s activities. One instance where the shareholders do not participate is when the company is being held liable for its debts and any actions it takes that affect the business in an adverse manner. These situations are the responsibility of the corporation.

A corporate structure may well be the best way to open a business because the corporation exists separately from its shareholders.

Corporations are owned by their stockholders, who share in the gains and losses generated by the company, and have three distinct characteristics:

  • Legal Existence,
  • Limited Liability, and
  • Continuity of Existence.

What are the disadvantages of incorporation?

  • It is more expensive and complex to operate.
  • There is more of an administrative burden. For example, annual meetings of shareholders must be held, the Corporate Registry requires an annual return (due each year by the end of the month following the anniversary date of incorporation/amalgamation), and notice of change of any
    information must be filed if applicable, as well.
  • The corporation also requires its own tax return separate and apart from its shareholders

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