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Some disadvantages of a corporation include the following:

• Expense. There are substantial costs involved in incorporating.

• Potential tax difficulties. Operation losses and tax credits must remain within the corporation and cannot be used by individual shareholders against personal tax.

• Difficulty of dissolution. Because a corporation is a legal entity, it can be difficult to dissolve. All the obligations of the corporation must be satisfied and documentation must be filed with the appropriate government authorities.

Depending on the terms contained in the shareholder’s agreement you can easily expand your dream operation and franchise additional units as time and finances permit. If one investor disagrees with the direction of new growth, the will of the majority of investors will prevail, allowing for smoother operation. Again, as with partnerships, we strongly recommend that you enlist the aid of a lawyer in drawing up a shareholder’s agreement, including a buy/sell provision.