Describe corporations. List their
advantages and disadvantages.
Answer: A corporation is a business that is legally
considered a separate entity from its owners. They may sue and be sued; buy,
hold, and sell property; make and sell products; and be tried and punished for
crimes. An advantage of incorporation is limited liability: Investor liability
is limited to personal investments in the firm. Another advantage is
continuity. Corporations also have advantages in raising money. By selling
stock, they expand the number of investors and available funds. One
disadvantage is that a corporation can be taken over against the managers'
will. Also, start-up costs are high. Corporations are regulated and must meet
legal requirements in the states in which they are chartered. A drawback to
incorporation is double taxation. Different kinds of corporations help
businesses take advantage of incorporation without assuming all of the
disadvantages.
Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition
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