Disadvantages of Incorporation

Reasons for Not Incorporating Your Business

The following are possible reasons why you should not incorporate your business.  You should give these disadvantages of incorporation serious consideration prior to starting the incorporation process:

Statutory Compliance Burden

Compliance with statutory and Accounting requirements place a significant burden on companies, both in terms of staffing, cost and time.

Costs of Incorporation

There are fees associated with the initial company incorporation, and ongoing operations.

Double Taxation

Double Taxation – company profits are taxed, and then the dividends paid to shareholders from the “net” profits are also taxed.  With non-incorporated business’s, any income the owner receives from the business is only taxed once. Double taxation can be avoided if the corporation is registered as an “S-Corporation”

Loss of flexibility

The separate legal entity status of incorporation also means that the company finances are separate from the individual’s, therefore the individual cannot “borrow” money from the accounts of the corporation...

To read about the benefits of incorporation click here.