Question

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

Answer 1

A) True

Step-by-step 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.