Advantages of the Corporation Model - Term Paper Example

Task: Raw’s Paper Introduction Your idea is brilliant and environment friendly and many s will encourage such an initiative. The idea is initiated through various channels but first requires authentication and safeguarding through creation of a patent. This will ensure you have full authority of your mode of the biotech formula of turning garbage into fuel. My Advice Currently, the largest and thriving companies are corporations that have perfected the art of quality production and impeccable service. Your company will increase its growth potential if it embraces this model. The corporation layout incorporates many advantages, as I will explain in this report. Your idea is conventional; furthermore, it is in your best interest that the largest numbers of customers share the benefits. Indeed, corporations are widely revered for their success in the business world. Advantages of the Corporation Model The first major advantage of this model is limited liability of the stakeholders of the business (McQuaig & Billie 751). In case the business is declared, bankrupt or is engaged in a very expensive lawsuit the stakeholders are only entitled to pay amounts equivalent to their holding in the company. This assures the stakeholders that the debt will not exceed their personal property as experienced in sole proprietorships and partnerships. If the credits owed are not payable, there will be liquidation of the assets. This limits any personal obligation of the company’s stakeholders on the debt of the entity. This can guarantee the stakeholders a soft landing despite the unfavorable conditions since their personal property is intact. Secondly, a corporation is a distinct legal person illustrating that it has its jurisdiction. This means that the firm will possess its own property, engage in contracts, acquire, and terminate its possessions. This is beneficial, as the property of the firm will not be attached to individuals. However, the company will utilize this independently to satisfy the objectives of the firm. In legal proceedings, it is the company that is indicated and not the owners or employees of the firm (McQuaig & Billie 751). The business can pursue its operations when the executives are relieved of their positions. In sole proprietorship, the business is not separate from the owner; therefore, the proprietor determines the dissemination of resources in the organization. A contract is not detachable from a sole proprietor since his signature certifies the deal and he is obligated to fulfill the requirements. Since he is not eligible for the same exception as a corporation, he will be wholly liable for the inconveniences experienced. The third advantage of a corporation is the accessibility to funds required to initiate the company. A corporation can amass capital since it has numerous investors willing to put in their investment. In addition, banks favor lending credit to corporations than sole proprietorships (McQuaig & Billie 751). Therefore, it is easier to inject additional funds to enlarge Newco’s market share in the recycling business. Banks offer credit to corporations on a long-term basis thus allowing the corporation sufficient time to plough back profits and repay their arrears. This gives the company time to acquire decent profits to enable them repay their liabilities. Corporations are also capable of sourcing funds through trading stock in capital markets or issue corporate debts, that is, bonds. This advantage will facilitate the growth of Newco’s and numerous resources will be available. Continuous life is another outstanding benefit for the corporate model (McQuaig & Billie 751). The continuation of a corporation cannot be restricted by the owners demise, withdrawal or incapacity to perform his earlier functions because of natural causes or otherwise. The corporation is considered separate from the stakeholders. Thus, it continues life on its own for the number of years stipulated in its charter. The life of a firm is established by law unlike that of a sole proprietorship that can be terminated on death while that of a partnership is affected by disputes within the partnership. When a leader of a corporation is considered incapable of leading the corporation due to illness, death or even criminal engagements the executive board of the firm is responsible for hiring another heir. The succeeding heir has to have management capabilities that match and extend beyond his predecessor. This qualifies the corporation as the most reliable company model as its life capacity is unlimited. The fifth quality is a centralized authority that is responsible for delegating authority and duties to employees of the business that include management and other workers. This means the authorized persons embark on the chore on behalf of the owners thus this work is delegated to other professionals. The central authority is usually the executive, act as overseers of the progress of the company. This means that the decisions borne by the centralized authority are widely analyzed. In addition, corporations employ professional management to make appropriate and timely judgments that will enable the company attain its objectives. The managers will use their talent and expertise in proper management. Since the managers harbor efficient management skills, they are able to adequately monitor the activities of their employees and instruct them accordingly. This heightens the confidence of the stakeholders as they are reassured the managers are capable of attaining the firms goals. Sixth, is the advantage of offering easy transfer of ownership that is exemplified by trading of stock equities (McQuaig & Billie, 751). This allows corporations to encompass perpetual life. A stakeholder of the business can easily transfer his /her fraction of the possession of the shares without necessarily requiring approval from the other owners. Hence, a stakeholder has the capacity to accomplish trade in stocks and gain revenue from that act. The firm can optimize the trading in stock as a means of acquiring extra funds to further its ambitions. The company will also have the aptitude of reclaiming its shares if it is suspecting one of its stakeholders has malicious intentions on the company. However, this will be authorized by the court if convincing evidence is provided to substantiate this fact. This spiteful member will be relieved of the privileges enjoyed by him through his stature. Therefore, this qualifies that the objectives of the corporations are beyond the member’s personal interests. The seventh advantage is combined business skills and familiarity of the work staff of the company. The corporation model consists of various divisions where each employee is assigned a specific duty that he is to apply, for example, marketing, accounting, and human resources among others. The working staff has complementary skills that enable each department to perform accordingly. This gives the firm the optimum aptitude to discuss on outstanding issues and make conclusive judgments. This means that every department will concentrate on their roles and perform accordingly. Finally, dispute resolution of corporations is paramount since major decisions of the entity have to be acceptable by a majority of the shareholders. Stakeholders of the firm approve substantial decisions such as sacking of the directors, diversification of their business prospects or restructuring of the profit payout .This ensures proper evaluation of the corporation’s decisions to avoid negative repercussions. Disadvantages However, corporations are not lacking of disadvantages that may discourage the embracing of this model .initiation of corporations requires numerous legal formalities despite the registration of the company’s name and certification of its objectives. The pursuit of the business licensee may be tiresome since many of the legal requirements have to be attained. Unlike sole proprietorships, which only require the owner of the company to register the trade name and acquire permit, corporations have to conform to the requirements of the Corporations Act. Another inevitable shortcoming of this model is double taxation (McQuaig & Billie, 751). Corporate firms are obligated to pay corporate tax and income tax on employees. This double taxation lowers the revenues of the firm and increases the arrears of the company. The corporation tax takes up a fraction of the company’s revenues unlike in a sole proprietorship where it is solely on the proprietor’s personal income. Therefore, I would counsel you to employ the corporate business model. Corporations are the highly applauded mode of trade as ascertained by their numerous advantages. They are not limited by an individual’s age thus exudes perpetual existence. Therefore, a person’s legacy and invention is carried through many generations after his/her demise. Works Cited McQuaig, Douglas. & Bille, Patricia. College Accounting 1-26.New York, NY: Cengage Learning, 2007. Print. Read More