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The Advantages and Disadvantages of Incorporating a Business In order to mention all the advantages and disadvantagesof incorporating a business first I should try to explain what a corporationis In 1819 Chief Justice Marshall of the United States Supreme court said A corporation is an artificial being invisible intangible and existingonly in contemplation of the law In the Websters College Dictionarycorporation is defined as an association of individuals created by lawand having an existence apart from that of its members as well as distinctand inherent powers and liabilities A corporation is divided into manyunits called shares of stock The owners of the stock are called stockholdersor shareholders One of the advantages of incorporating a business is thatbecause a corporation has a legal existence shares can be sold at any timewithout affecting the operations of the corporation Also shares can bebought at any time Another big advantage of incorporating a business isthat corporation have limited liabilities This means that the corporationis responsible for its own acts and obligations under the law Thischaracteristic protects the stockholders of the corporation because the onlyfinancial loss that they may suffer is limited to the amount invested Alsothe creditors of the corporation can not go beyond the assets of the corporationto satisfy their claims The stockholders or the shareholders are the ones whohave control over the management of a corporations operation andactivities They are the ones who elect the board of directors and the boardof directors are responsible to the stockholders Also the board of directorsare responsible for the management of the day-to-day operation of thecorporation They also decide when and how much of their income to give tothe stockholders or shareholders Another characteristic that can be an advantage ofincorporating a business is that corporations may be organized for nonprofitorganizations such as colleges hospitals and others humanitarian purposesHowever most of the corporations are organized to earn a profit forstockholders The biggest disadvantage of a corporation is that corporationsare subject to taxes
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