Denominations, while not evil, are not God's design for the local church. The Bride of Christ, which is God's people, the Church (with a capital C) is made up of those who have been regenerated by the Holy Spirit and are Christ's disciples. Denominations, while attempting to promote unity and orthodoxy end up being divisive. I believe that denominations are formed, joined, and defended by God fearing people for good reasons. One of those reasons is to earnestly defend the faith once handed down to the saints. However, after a few generations I think that these denominations start to be polluted by syncretism, and eventually orthodoxy suffers. 

Why does this happen? 

I believe it is because denominations tend to attempt to replace the Holy Spirit's role as the guide of the local body. As a denomination decays, for some, tradition replaces truth, and the social gospel replaces the witness of the Gospel under the guise of mission. As Christ is the head of the Church and a man the head of his household, the Elders are the head of the local body (after Christ of course, Who is supreme). For a man to give leadership of his household, a position in which God has placed him, is a failure of his duty to God and his family. The same is for the Elders of a local congregation to give their God-given authority to another group (Classis, Synods, etc).