Discuss three advantages and disadvantages of incorporating Urban Pty Ltd compared with the type of business they were operating before registering Urban Pty Ltd.
By incorporating a business has too many favorable aspects for business some of these are described below in favor of Urban Pty Ltd Company. Section 125 from corporation act 2001
Limited personal liability is the most important reason for Urban Pty Ltd to become corporation because a corporation has its separate legal entity. That is why incorporating helps to protect the personal assets of the business owners in both cases, if the corporation is under debt or having other liabilities.
In the case of incorporation, ownership of business can be transferred to others easily by selling its stocks. Furthermore, the board of directors has the decision making power to transformation of incorporation with mutual consent or as per constitution. In Urban Pty Ltd if the borrowing limit exceeded fro 50,000, it requires approval from the directors in general meeting.
Being as incorporation, it plays important part in the good will of company on the part of clients as well as investors. That is why it becomes easier for Urban Pty Ltd to raise capital from a bank to fulfill their need. By incorporating a business, it gives us opportunity to expand or fulfill immediate need of business by raising capital from selling stocks or borrowing from a bank.
As incorporation has many benefits for a business, it has also some limitation for business which is described below. Advantages And Disadvantages Of Incorporating Urban Pty Ltd
By incorporating a firm, it limits business objective according to the outlined in constitution. In case of Urban Pty Ltd one of the partner wants to enter in mobile cover manufacturing business. But constitution of Urban Pty Ltd does allows to enter in any business rather than furniture manufacturing. Advantages And Disadvantages Of Incorporating Urban Pty Ltd
When incorporation is formed, it limits to follows the required structure outline in constitution. In case of Urban Pty Ltd if borrowing amount exceeds from the 50,000 it requires prior approval in general meeting. While before corporation john has signed a contract of office furniture supply. John is an agent of Urban Pty Ltd and signed contract without any prior approval.
Incorporating a business requires cost to file your article of incorporation, potential attorney or accountant fess. In case of Urban Pty Ltd, money and time is required to get the services of consultant. It is necessary to file article of association along with completing its entire requirement to be incorporated.