Pros & Cons Of Corporations
For starters – a corporation is a legal entity that is distinct and apart from its operations.
Many individuals either invest directly or indirectly in a corporation through mutual pension and retirement plans. These very same stockholders provide capital for corporations to grow. Corporations have the choice to decide if they want to be a publicly-traded company or if they prefer to stay in the private sector.
- One of the big advantages for a corporation is it’s really easy for them to make money. They can sell stock on the stock market and generate funding that way. The downside is there is a give-up on equity and ownership of the company.
- It is really easy to attract new people, especially attracting talent, because you normally are generating higher amounts of revenue, which in turn makes you offer better packages compared to your competitors.
- Another advantage is visiting the bank for money or to the bond market where they could get a bond (which essentially is an IOU) and pay back a coupon payment (which is the interest rate on whatever the debt that they are taking on is). So it’s fairly easy to raise capital.
- It is really expensive to start a corporation. It requires a lot of paperwork, time, dedication, and it’s a lot of legal jargon that you have to sift through.
- You must get approval through your state government and also the national government. If you expand and grow even bigger (i.e., go global), so much more complexity gets thrown into it.
- Dealing with shareholders and the government can become quite difficult and even messy, especially when shareholders get discontent with you and try to overrule you in order to take over your corporation.
The best thing to do is make sure you educate yourself well and throughout before making a final decision on what kind of company you are planning on starting!