There are also some disadvantages to consider when choosing the corporate form of organization for a business, including:
- Double taxation: Corporate earnings are taxed twice, first as corporate income taxes and then again as personal income taxes when the corporation distributes its earnings to shareholders. This can result in a higher overall tax burden for the business.
- Difficulty in control: Because ownership is typically separated from management in a corporation, owners may have difficulty exercising active control over management actions. This can be frustrating for owners who want to have a more hands-on role in the business.
- Greater regulation: As a legal entity created by the state, corporations are subject to considerable regulation of their activities. For example, the withdrawal of funds from a corporation may be subject to limits set by law. This can be burdensome and can limit the flexibility of the business.
