Advantages of Becoming a Company

Advantages of becoming a company:

Potential for outside investment would help with growth; given that their business is expanding. Corporation can raise capital through selling shares, partnership would need to be dissolved if took on another partner

Limited liability（company is a separate legal entity）-currently a general partnership( they have unlimited liability at present because they are both general partners). Unlimited liability means their personal assets may be at risk if the firm encounters financial difficulties.

Tax benefits-companies can recognize more expenses which decreases profit and thereby tax

More likely to be able to attract more investors.

More credibility if structured as a company rather than a partnership, may help their reputation.

Can register company name-will help with branding

Continuous life- partnership need to be dissolved if one partner leaves, but corporations have perpetual life.

Easier to transfer ownership through sale of stock.

Disadvantage:

Currently management structure will note change, because will just become a company with Harry and Anne as the only shareholders, but if the firm gets even bigger and get more shareholders, they may lose some control as other shareholders become involved in decision-making.

If they grow and get more shareholders, they will have to share the profits, accommodate other shareholders` interests, potential for takeover.

Higher costs: set up costs

Higher costs to maintain e.g. Need to have audited financial statements each year, more record-keeping costs

Companies are more regulated-more legal requirements e.g. having to prepare financial statements.