Organizing as a corporation makes it easier for the firm to raise capital. This is because corporations' stock-holders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests. A) True B) False

Question

Imani Myers

Business

21 May, 10:24

Organizing as a corporation makes it easier for the firm to raise capital. This is because corporations' stock-holders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests. A) True B) False

+5

Answers (1)

Know the Answer?

Rachael Ali · Answer 1

A) True

Explanation:

Organizing a partnership has several advantages; it is much faster, simpler and easy, start up costs are very low, etc.

But it has one huge disadvantage over a corporation, the partners are completely liable for the partnership's debts and obligations. That means that if the partnership goes bankrupt, the partners must pay all the debts and obligations. While a corporation's stockholders are only liable for the amount they invested in stock, i. e. you buy $10,000 in stock, then all you can lose is $10,000.

Also a corporations stocks are easily traded while a it is very complicated to transfer partnerships' rights.