Incorporated Companies are a type of business whose shares can be bought and sold. It is perhaps the most common type of business organization used worldwide.
Incorporated Companies are companies whose capital is at least 100,000 TL if they are open to the public and at least 50,000 TL if they are closed to the public and are established with unlimited partnership. Unlike other types of corporations, shareholders have only limited liability. In such cases, they cannot be held personally responsible for the debts and obligations of the partnership. For example, if one of these companies goes bankrupt while owing money to certain shareholders (creditors), the shareholders will never have to pay the entire debt out of their own pockets. In other words, the shareholders will only lose the amount invested in the company.
Advantages of Establishing a Incorporated Company
Limitation of Liability
One of the biggest advantages of a Incorporated company is the limited liability of its members. Their liability is limited only to the capital debt they have assumed. The private property of the shareholders cannot be seized for the collection of the company’s receivables.
Scope of Growth and Expansion
Incorporated Companies have the potential for growth and expansion that is not available to other types of companies. People can buy shares in a Incorporated Company with the expectation that the company will grow over time and make significant profits. There is no limit on people. The company’s board of directors decides how much emphasis will be placed on growth, which sectors it will be spread to, where to invest, etc.
The management of Incorporated companies belongs to directors duly elected by the shareholders. Very competent, talented people are selected, which ensures effective and efficient management. Thus, the existing skill is used for the benefit of the company. Therefore, company organization becomes like a bridge between skill and capital.
Transfer of Shares
Shareholders of a public Incorporated Companies have the right to transfer their shares to others. The shares of most Incorporated Companies are traded on the stock exchange and can therefore be easily sold.
Thanks to the board of directors responsible for the company and the shareholders, the obligation to share some documents and reports with the public will create an increase in trust. This makes records more transparent and the risk of fraud lower.
Disadvantages of Establishing a Incorporated Company
The legal formalities and procedures required in the establishment of the Incorporated Companies are numerous. Hence it can be considered its most significant drawback. Complex, long and at the same time costly, these procedures can take several weeks.
Incorporated Companies will have to disclose information about their activities, financing and other sensitive matters as they are expected to be open and transparent with their shareholders. In addition, such information is open to the general public. As a result, it is difficult to maintain complete confidentiality about the company’s activities.
Separation of Management and Company Owner
One of the biggest disadvantages of Incorporated Company is that company owners often do not have a say in how their companies are managed. Instead, a board of directors or other body decides on their behalf. Sometimes this can lead to mistakes being made that can be detrimental to the success of the company.
For the establishment of Incorporated Companies, there must be a minimum capital of 50.000 TL. In addition Incorporated Company with a capital of more than 250,000 TL are obliged to have a lawyer.
Delay in Decision Making
One of the disadvantages of the Incorporated Company is that it is often delayed in making decisions. This can be seen in the case where there are people who do not want to compromise their ideas and make it difficult for them to make decisions, or it can be seen when they are hindered by different levels of power within the company. Another disadvantage of the Incorporated Company is that there is a high probability of internal conflict between the members of the board of directors in cases where interests do not match.