Advantages of Incorporation. 1. Limited liability.

As observed in Jenkin vs pharmaceutical society of lirent Britain (1921) ich 392 limited companies are offsprings of preview necessity, that is, men should be entitled to engage in a commercial pursuit without involving the whole of their fortune in that particular pursuit in which they are engaged. 2. Transferability of shares. Shares in a company can be transferred (subject to restrictions in the articles of associations) from one person to another without the consent of other members. 3. Separate Legal entity. A company is not affected by the death, insanity or bankruptcy of a member. 4. Control Control can be gained by acquisition of majority shares which carry voting power. 5. Permanent existence. A companys life is permanent. 6. Separation of ownership and management. Shareholders are owners of the company. Shareholders elect their representatives to the board of directors, which manages the affairs of the company.

7. Expert management. Companies run large-scale business and have adequate financial resources and as such can afford the services of specialists. Thus companies are run professionally.

8. Public confidence. Formation and running of a company is regulated by the provisions of the companies Act and various other acts. Provisions regarding the appointment and remuneration of directors, compulsory audit and publication of accounts protection of minority shareholders have credited greater public confidence. 9. Social Advantages A company helps to gather savings from the public and invests them in sound industrial and commercial ventures. Companies provide employment opportunity to many and

since they operate in large scale they ensure economic use of national resources And provisions of goods and services to the public at lower prices.

Disadvantages of incorporation 1. Formation of companies is a complicated procedure and is costly. Documents requited like the memorandum of Association, the articles, the prospectus or statement in lieu of prospectus are usually drawn by legal experts who charge high fees for their preparation. 2. There is no secrecy regarding the affairs of a company. Wide publicity of the company affairs may lead to economic sabotage by its rivals. 3. It is very expensive to administer a company. This relates to requirements

pertaining the holding of general and statutory meetings and returns of annual accounts. The accounts and audit reports require expenses. 4. Doctrine of ultra vires. A company can only trade on the business specified in

its object clause of the memorandum of association. 5. Taxation. A company must pay taxes as a legal person while this is not a

requirement for partnerships. 6. There are many formalities before a business starts trading. 7. The winding up of a company is widely published thus exposing the property of the company to an insecure position.