What is a disadvantage of forming a corporation?

Forming a corporation comes with various advantages, but one significant disadvantage is the subservience of minority stockholders to the wishes of the majority, subject only to equitable restraints. This means that in corporate governance, decisions are often made based on the majority vote, which can marginalize the interests of minority shareholders.

This aspect is crucial because minority shareholders may find themselves unable to influence critical business decisions, even those that could adversely affect their interests or the overall health of the corporation. While minority rights exist to protect them from oppressive conduct, these protections may not always be sufficient against the majority's decisions. This dynamic can lead to feelings of disenfranchisement among minority shareholders, who may have invested in the corporation but lack the ability to assert their views effectively.

In contrast, the characteristics associated with the other options illustrate advantages or neutral aspects of corporate formation. For instance, the limited liability feature protects shareholders from the corporation's debts, providing them with security. The power of succession ensures that a corporation can continue its existence despite changes in ownership, while free transferability of ownership encourages investment by allowing shareholders to sell their interests easily. Therefore, option B accurately identifies a critical disadvantage of corporate formation.