Corporation Law - Legal Issues

[Name of the Instructor]

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Corporation Law - Legal Issues

Introduction to the Case no. 1

Nicola is concern about legal issues. Nicola and May are two business partners, operating second-hand books shop, located in leased premises. They also have two employees working in their shop. However, Nicola and May wanted to expand their business. They also have an opportunity to purchase two book shops in a nearby village. For which they required extra funds and also extra man power to run those new ventures.

There are two concerns Nicola is worried about. Firstly, the potential legal responsibilities for the sum unpaid and of the partnership. Secondly, she is worried about the future of the business. Since the lease is distributed between both of partners, what will happen if one of them decides to leave?

Question no. 1

Advice Nicola on the Advantage and Disadvantage of Incorporating. If you recommend incorporation, what forms of incorporation would be the most appropriate? And why?

Answer no. 1

There are several advantages associated with Incorporation, and this is primarily the reason that it is swiftly becoming an important business approach. It provides protection to personal assets, minimize your liabilities, sustainability and various other kinds of taxation benefits and legalities. In this contemporary era, numerous businesses are getting incorporated, not only nationally but also internationally. Investors of various countries are offering range of tax related incentives to attract entrepreneurs. Nicola should understand and overlook these advantages and disadvantages of incorporation before taking any further decision. However, there are various forms of incorporation in business realm, and advantages and disadvantages are also distributed accordingly. But, some general advantages and disadvantages related to incorporation are as follows.

Advantages of Incorporation

Limited Liabilities: It is one of the biggest advantages of incorporation. The company in itself is a legal identity; therefore, its associated members are not liable for the unpaid sum. The liability of each individual is restricted to its share in the corporation. This advantage might not work for sole proprietorship, but it is relative an advantage in Limited Partnership and Corporation.

Transferable Share: The shares are easily transferable since an incorporated business is a joint stock company (Section 82). Similarly this advantage is not connected with sole proprietorship.

Separate Property: The property of any incorporated company is not the possession of any of its stake holder. The company in itself is the owner of its property and belongings.

Lawful Capabilities: None of the member or stakeholder can get sued. The company can sue others and can get sued in its own name. This advantage would not link with sole proprietorship and partnership incorporations.

Perpetual Secession: Incorporated companies are immortal. Since company in itself is an identity, therefore, its stakeholders might come and go, but the company remains forever. Most preferably applicable upon corporate companies.

Independent Corporate Existence: Under the Companies act of 1956, a company is autonomous and distinct from its members. A company in itself is a legal identity.

Disadvantages of Incorporation

Formal Expense: The formal proceedings of incorporate company are quite expensive. It requires various ...