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4 Aug 2018

What are the four primary disadvantage to the sole proprietorship and partnership forms of business organizations? What benefits are there to these types of business organization as opposed to the corporate form?

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Irving Heathcote
Irving HeathcoteLv2
5 Aug 2018

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Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?
Answer

Corporations generally find it relatively difficult to raise large amounts of capital.

Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership.

Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization.

Corporate investors are exposed to unlimited liability.

Corporations generally face relatively few regulations.

Jane Doe, who has substantial personal wealth and income, is considering the possibility of starting a new business in the chemical waste management field. She will be the sole owner, and she has enough funds to finance the operation. The business will have a relatively high degree of risk, and it is expected that the firm will incur losses for the first few years. However, the prospects for growth and positive future income look good, and Jane plans to have the firm pay out all of its income as dividends to her once it is well established. Which of the legal forms of business organization would probably best suit her needs?
Answer

Proprietorship, because of ease of entry.

S corporation, to gain some tax advantages and also to obtain limited liability.

Partnership, but only if she needs additional capital.

Regular corporation, because of the limited liability.

In this situation, the various forms of organization seem equally desirable.

  1. The corporate structure – ownership rights and limitedliability – Profitability and the markets

What is the difference between a sole proprietorship, apartnership, and a corporation?

Answer:

What is Capital Budgeting and what does the Capital Structure ofa company refer to?

What is the “cost of capital” for a company?

What is CAPM?

What is the book value of a company as opposed to its marketvalue?

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