Organizing as a corporation makes it easier for the firm to raise capital.This is because corporations' stockholders 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.

Question

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When a corporation is formed, the company can issue shares of stock to raise capital. Unlike partnerships, where each partner is personally liable for the debts and obligations of the business, the stockholders of a corporation have limited liability. This means that their personal assets are not at risk if the corporation goes bankrupt. Additionally, the transfer of shares of stock is much simpler than the transfer of partnership interests, making it easier for investors to buy and sell ownership in the corporation.

Organizing as a Corporation Makes It Easier for the Firm