Advantages and disadvantages of Incorporation of a Company

Advantages and disadvantages of Incorporation of a Company

Industries and business increase constantly in a developing and progressing country and for this capital is required. This capital is received from government and non government sources. The object of investing capital in the industries by the investors is the facility to earn maximum profit in return of minimum risk. In comparison with other business organisations there are some such type of special profits of incorporation of a company which fulfil its object.

Advantages of Company Incorporation

(1) Separate and Legal Entity – First advantage of incorporation is separate and legal entity of company. That individual is a man of procedures who is free from his members. His responsibility is perpetual.

(2) Transferability of Shares- Transferability of shares is possible. It does not affect adversely the existence and management of the company. Except this, the capital invested in any of the companies cannot be withdrawn before as liquidation.

(3) Limited liability-Liability of the shareholders in the company is limited. The shareholders are neither the owner of the business of the company, nor bound for its liability other than the payment of their share. The Act related to a company having limited liability in the of a most intelligent justice has helped a lot in the industrial development of the country.

(4) Incorporated Financial Management-On account of ruling of shares, a maximum capital can be acquired within a minimum period. Petty capitals make a major capital which can be invested in the business meant for public welfare. On arising of requirement of more capital for extension of work, the company can issue debentures according to its councillor’s jurisdiction. Amount on less interest can be obtained by this source. This facility cannot be available in other type of business organisations.

(5) Separate Property- On the basis of a proper person, the company has got right of earning money, utilisation and acquaintance in its own name. The company can present suit and suit can be lodged against the company. Now the shareholders have got right on any share of the property of the company or on any post of the company because there is no legal or timely interest in it. No member can have interest pertaining to insurance in the property of the company.

Disadvantages of Incorporation

(1) Legal Immunity of real persons- Though the company is an artificial person but its real work-load is conpersons. Experience has proved that to consider the liability vened by any real person and meant for the welfare of real a company, consideration on the activities of its past of persons is necessary. Cunning persons some working real times escape from the real liability taking advantage of this particular persons who take advantage law. There are some of incorporation.

(2) Evasion of Taxes- Sometimes the company is established with an intention to escape from taxes.

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