Disadvantages of Incorporation

  • Closely regulated (For example, the Business Corporations Act requires all companies to file an annual report and also file any changes to the location of company offices and its directors. The company is also required to maintain certain corporate records).

  • Most expensive form of business to organize (higher start-up costs related to professional fees for legal and accounting services)

  • Charter restrictions

  • Extensive record keeping necessary

  • Possible double taxation of profits

  • Shareholders (directors) may be held legally responsible in certain circumstances

  • Personal guarantees undermine limited liability advantage