Small Business Your Leading Source For Legal Information. Disadvantages of a Corporation Drawbacks include cost, liability, regulation. The corporation is an expensive way of doing business. The cost varies based upon the amount and type of stock to be authorized and issued, the size of the planned corporation, the amount of business done, and the type of labor force needed. In addition, initial incorporation costs, including filing fees, organization taxes, and legal and accounting expenses, can be costly.
Shareholders have limited liability in most cases.
This limited liability is not absolute and a corporate shareholder can still be liable for the full price of his corporate stock if the stock was originally purchased at a discount. As previously stated, shareholders are also liable in most states for unpaid wages. The corporation is subject to greater governmental regulation and control than any other form of doing business. There are more rules and restrictions that must be followed. The corporation is subject to double taxation, once at the corporate level, and again at the shareholder level when a distribution of profits, called dividends, are made to shareholders.