Angie Baden is studying for her accounting midterm examination. Identify for Angie the advantages and disadvantages of the corporate form of business organization.

Find them and explanation below.

Explanation:

A corporation is a type of business that is collectively owned by shareholders. There are two types of corporations, namely; the C and S corporations.

The general advantages of the corporate form of business organization are;

1. Ease in sourcing capital: Capital can be easily gotten from shareholders who pool resources into the business.

2. Limited liability: The shareholders can only be affected up to the amount they contributed to the business. They would not be held accountable for the general loss in the business.

3. Continuous existence: Since the business is not owned by just one person, the death or exit of a shareholder would not affect the continued existence of the business.

4. Ease in transferring ownership: Stocks and bonds can be easily sold by a shareholder to another investor.

5. Absence of double taxation (for S corporation): Taxes are only charged at personal rates.

The disadvantages of a corporate form of business include:

1. Secluded management: The investors in the business may not be actively involved in decision making, thus leaving the business to just the managers.

2. Double taxation (for C corporation): Both the federal and state governments tax the income made the corporation. The shareholders are also taxed on the profit which they made from the business.

3. Expensive startup: It is quite expensive to start up a corporation.

4. Rigorous tax fillings: A lot of paperwork on tax filing is required by the state government.

5. The S corporation has a limited number of shareholders (just 100).

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