COMPANY LAW

Company Law Assignment

Company Law Assignment

Answer to the Question # 1

Advantages of Incorporating

There are numerous advantages of incorporating a company or a business. Effort is concentrated in areas of organizational and competitive procedures. Improvements are achieved in the short term and visible results. If there is reduction of defective products, results in a reduction in costs as a result of lower consumption of raw materials or products of better quality. Incorporating a business increases productivity and leads the business to competitiveness, which is critical for businesses today. Incorporating helps organizations adapting to technological processes. Incorporating obliterates poorly performing repetitive processes avoiding unnecessary costs (Cassidy, 2005).

Incorporating enables the business organizations to raise capital by issuing shares, bonds or other debt instruments. Another advantage of incorporating is that in case of death of one of the owners, the company can continue to operate as the direction is independent of the shareholders. The property is easily transferred. Business is much easier having an incorporated company. Banks and businesses will be more willing to do business than if they face a natural person. When incorporating your business, you company has an unlimited life (Hinchy et al.,2009).

The two biggest reasons for incorporating your business are: personal asset protection and tax advantages.

Personal Asset Protection

The biggest reason why individuals choose to pursue a business through a incorporation is to achieve protection over their personal assets, such as home, family savings, and other assets.

If the business fails, these personal assets cannot be touched. They will be, therefore, protected from creditors. In other words, creditors cannot go knocking on the doors of the shareholders.

This limited liability corporation does not apply to so-called "sole proprietorship", or "partnership”. Societies respond with their own property for the debts of the company (Hinchy et al.,2009).

Tax Advantages

While corporations or LLCs can set your gains deductions to lower the payment of this tax, the other informal structures such as sole proprietorship or partnership does not enjoy these benefits. For example, medical expenses, life insurance or disability, are fully deductible for corporations. In addition, a corporation may own shares of another corporation, and receive 80 percent of the dividends tax free. By entering into a partnership, individual partners of a business can enjoy a wide range of benefits. For example, the burden of running the business is shared by all the owners and this means that they do not have to be solely responsible for all the duties and tasks that they would be if they were sole proprietors. Speaking of business incorporation is about the process of doing business as a separate legal entity. Apart from this, there are a myriad of tax advantages that are offered to corporations by the government in order to ensure their continued operations. Incorporating the company frees the leader of the business organization (President or CEO) from many legal issues and incorporated business organization is a specific legal entity from the perception of the law. Therefore, the Corporation alters the way the business is considered from the perspective of the law and how ...