Disadvantages of the company.

1. Heavy taxation. A company must pay a high rate of taxation on its taxable income. If part of this income is distributed to the owners in the form of dividends, the dividends are considered to be personal income to the shareholders and are subject to personal income tax. This practice of taxing income twice (first when earned by the company and again when distributed to the shareholders) is sometimes referred to as “double taxation of company profits”.

2. Greater regulation. Companies come into existence under the terms of appropriate laws and these same laws may provide for considerable regulation of the company's activities. For example, information set out in financial statements must meet requirements set by law, rather then being left entirely to the judgment of the owner. Large companies, especially those with securities listed on stock exchanges and owned by large numbers of the public, have gradually come to accept the necessity for full public disclosure of their affairs.

3. Separation of ownership and control. The separation of the functions of ownership and management may be an advantage in some cases but a disadvantage in others. On the whole, the excellent records of growth and earnings in most large companies indicate that the separation of ownership and control has benefited rather than injured shareholders. In a few instances, however, a management group has chosen to operate a company for the benefit of insiders (for example, paying excessive executive salaries and bonuses). The shareholders may find it difficult in such cases to take the concerted action necessary to oust the officers.

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Advantages of the company.	\|	THE KEYS

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