Overview of Advantages and Disadvantages
A South Carolina corporation can have greater flexibility over other business entities in the types of investment vehicles it can offer and therefore may be more attractive to investors. The relative ease with which corporate ownership interests can be transferred, unless restricted, when compared to partnership interests, further enhances the desirability of the corporate form if the need to attract investors is a factor in selecting the business form.
Corporate Bylaws will constitute an additional documentation burden if the corporate form is selected. However, they also serve to provide a method for the resolution of disputes with regard to certain issues that may arise between and among shareholders and/or directors and a means by which shareholders may obtain a voice in the day-to-day operation of the corporation without becoming personally liable for its debts. Furthermore, if multiple transfers of ownership interests are anticipated or if perpetual operation of the business is desired, the corporate form makes it possible to easily satisfy these requirements. The corporation also lends itself to the issuance of stock options as a means of attracting, providing incentives for, and rewarding employees.
A major disadvantage of the corporate form is that it requires observance of many formalities, thereby necessitating greater administrative expense than noncorporate forms. Also, because the corporation exists only as provided for in the South Carolina Business Corporation Act, there are some limitations on the flexibility of the structure when compared to the general partnership, limited partnership, or limited liability company, which can be structured by contractual agreement in virtually any manner agreed to by the partners or members.