Disadvantages of Company

Company has following disadvantages:

1) Lack of Personal Interest:

The owner of the company are shareholders but it is run by the directors and managers who are the employees of the company and employees cannot be as sincere to the company as the owners are. Therefore, there is a lack of personal interest in the company.

2) Excess Taxation:

The company is subject to high taxation as compared to other form of ownership. The income of the company is dually taxed. First it is taxed as an income of the company and secondly as an income of shareholders. Moreover, the company has to pay various other types of taxes.

3) Government Restrictions:

Company has to face various government restrictions like compulsory registration, external audit of financial reports and submission of audited financial report to the registrar of the company.

4) Organizational Expenses:

The company has to pay heavy formation expenses like registration fee, promoters and legal advisor fee, printing expenses of shares and prospectus. In other forms of ownership , there is no such expenses required.

5) Lack of Credit Standing:

Unlike sole proprietorship and partnership, company does not enjoy high credit standing. As the creditors know that the liability of the owners (shareholders) is limited to their investment and business debts can be recovered only by selling assets of the company.

6) Lack of Secrecy:

Business and financial secrecy cannot be maintained in the company. It is must for a company to have its financial statement audited and published in thousands of copies and submit it to the registrar of the company, stock exchange and send them to the shareholders.

7) Charter Restrictions:

Unlike the other forms of ownership, company has to face various charter restrictions. It cannot change its name, name of business, objectives, address and capital without prior permission of registrar of the company. This requires more capital and time.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top