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contracts. For this reason, the corporation
is an ideal means for the
conduct of business by many smaller enterprises as well as larger
ones.
The corporate form of business has some advantages and
disadvantages. First, large corporations can hire talented managers
and specialist to conduct the business. Second, the owners of shares
have
limited liability; they are not responsible for corporate debts.
Third, the corporation is not damaged by the death or disinterest
of a particular person.
One disadvantage is taxation. As a separate legal unit, the
corporation must pay taxes. Then when the corporation pays
profits to individuals
in the form of dividends, the individuals
are taxed again on these dividends. This is known as double
taxation.
Another disadvantage is that the ownership becomes separated
from management. Sometimes managers
act more in their own
interests than those of stock holders.
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