Disadvantages of corporate enterprises: double taxation, high organizational cost and agency problems.
Advantages:
(1) Infinite existence: A company can continue to exist after the original owner and operator quit.
(2) Limited liability system: the company's debt is the debt of the legal person, not the owner's debt, and the owner's debt liability is limited to its capital contribution.
(3) The equity is easy to transfer.
Disadvantages:
(1) Double taxation: As an independent legal person, the company's profits are subject to enterprise income tax, and after the profits are distributed to shareholders, shareholders are also required to pay personal income tax.
(2) The establishment cost is high: The company law requires a higher establishment of a company than a sole proprietorship or partnership enterprise, and various reports need to be submitted.
(3) There is an agency problem: after the separation of the operator and the owner, the operator is called the agent and the owner is called the principal, and the agent may harm the interests of the principal for his own benefit.
A company-based enterprise refers to an economic organization that is legally established by investors (or shareholders) with a quorum or more, operates independently, is responsible for its own profits and losses, and has legal personality. At present, there are two forms of corporate enterprises in China: limited liability companies and joint stock companies.