What do you mean by incorporation of company and its advantages and disadvantages?
Answers
An incorporated business (also called a corporation) is a type of business that offers many benefits over being a sole proprietor or partnership, including liability protection and additional tax deductions. Forming a corporation also allows you raise capital through sale of shares of your company.
ADVANTAGES OF INCORPORATION
>Raising Capital—Incorporation is generally regarded as an indication that the owners are serious about their business enterprise, and intend to devote time and resources to the venture for a significant period of time
> Ease of Ownership Transfer—Ownership of the company can be transferred fairly easily by simply selling stock (though some corporations ?attach restrictions in this regard).
>Tax Advantages—Some businesses enjoy lower tax rates under the incorporated designation than they would if they operated as a partnership or sole proprietorship.
> Liability—This factor is often cited as far and away the most important advantage to incorporation. When a company incorporates, "the shareholders, the owners of a corporation, are liable only up to the amount of money they contribute to the firm, basically equal to their shares of stock
DISADVANTAGES OF INCORPORATION
:Regulatory and Record keeping Requirements—Corporate operations are governed by local, state, and federal regulations to a greater degree than are other businesses.
:Added Cost of Doing Business—Regulatory and record keeping guidelines and requirements often make it necessary for corporations to make additional investments (in accounting staffing, etc.) devoted to seeing that those legal requirements are met. In addition, there are fees associated with incorporating that business partnerships and sole proprietorships are not subject to.