Disadvantages of Corporations

Difficulty and Expense of FormationForming a corporation can be a rel­atively complex and costly process. The use of an attorney may be necessary to complete the legal forms and apply to the state for a charter. Charter fees, attorney’s fees, the costs of stock certificates and required record keeping, and other organizational costs all add up. These payments can amount to thousands of dollars for even a medium-sized corporation. The costs of incorporating, in both time and money, discourage many owners of smaller businesses from forming corporations.

Government Regulation Most government regulation of business is di­rected at corporations. A corporation must meet various government standards before it can sell its stock to the public. Then it must file many reports on its business operations and finances with local, state, and federal governments. In addition, the corporation must make periodic reports to its stockholders about various aspects of the business. Also, its activities are restricted by law to those spelled out in its charter.

Double Taxation Unlike sole proprietorships and partnerships, corpora­tions must pay a tax on their profits. Then stockholders must pay a personal income tax on profits received as dividends. As a result, corporate profits are taxed twice—once as corporate income and again as the personal income of stockholders.

Lack of SecrecyBecause open corporations are required to submit detailed reports to government agencies and to stockholders, they cannot keep their operations confidential. Competitors can study these required corporate reports and then use the information to compete more effectively. In effect, every public corporation has to share some of its secrets with its competitors.

I. VOCABULARY PRACTICE

Find in the text the English equivalents for the following phrases of words:

1. A revendica proprietatea corporaţiei/претендовать на собственность корпорации;

2. A expune acţiunile pentru vînzare/выставить акции на продажу;

3. Doar dacă în carta corporaţiei nu este prevăzut altceva/если только в уставе корпорации не предусмотрено иное;

4. A corespunde standartelor de stat/соответствовать государственным стандартам;

5. Activităţile stipulate în carta corporaţiei /деятельность, оговоренная в уставе корпорации;

6. Fostul Ministru al Apărării/бывший министр обороны.

II. COMPREHENSION

Match the words with their definitions:

1. limited liability	a) the effective management committee of a corporation
2. lending institutions	b) if the company fails, creditors have a claim on the personal assets of its owners
3. stockbroker	c) the highest position on a company’s board of directors
4. unlimited liability	d) if the company goes bankrupt, the shareholders cannot be asked to pay more than the nominal value of their shares
5. dividend	e) banks, insurance companies, building societies
6. management	f) a person who buys and sells stocks for other people
7. chairman	g) an amount of the profits that a company pays to its shareholders
8. board of directors	h) the people who run and control an organization

III. Complete the table with the appropriate words describing the pluses and minuses of the corporation status. (Figures denote the number of words):

Advantages	Disadvantages
1. Limited (1)	1. Its profits are (2)
2. Unlimited (1)	2. Difficult and (2)
3. Unlimited ability (1)	3. Its activities are controlled by (1)
4. Ability to recruit (2)	4. Impossibility to keep its (2)
5. Lack of difficulty in (2)

IV. FOCUS ON GRAMMAR

Complete the sentences using an adjective from box A and a preposition from box B:

A	B
similar	of
interested	with
critical	for
good	about
responsible	from
serious	at
satisfied	to
binding	in
different	on

1. Could you tell me who is _____________________________ customer complaints?

2. My current job is very _________________________________ my previous one.

3. Last month the company’s sales dropped dramatically. This is only ___________________ a slump registered 5 years ago.

4. Our shareholders are greatly ________________ the profit and loss account we publish twice a year.

5. The chairman opened the meeting by saying he was ____________________ the progress made.

6. The press were _________________________ the company because staff training had not improved.

7. My manager is _______________________ firing 2 people.

8. Tom was appointed as president of our corporation because he is very _______________ leading and motivating people.

9. The contract comes into force on the day of its signature and is _________________ both parties.

REVISION

Learning objectives: