Which of the following is a disadvantage of operating as a company?

Operating as a company does come with several advantages, but there are also notable disadvantages to consider. One significant disadvantage is the cost of incorporation and ongoing management. Establishing a company involves various expenses, such as legal fees, registration costs, and compliance with regulations. Once established, there are also costs associated with ongoing administration—such as annual financial statements, audits, and regulatory filings—which can be quite substantial compared to operating as a sole trader or partnership.

This cost factor might deter some individuals from choosing to operate as a company, especially those starting small or operating on limited resources. The financial burden of these requirements can impact a company’s cash flow and overall financial health.