Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 1 - Introduction to Financial Statements - Questions: 2

Answer

Advantages: Separate legal entity, transferable ownership, easier to raise funds. Disadvantages: More regulation, higher taxation.

Work Step by Step

The existence of a corporation as a chartered, separate legal entity means that owners/stockholders are free from liability. Transferable ownership means that shares of stock can easily be bought/sold and are considered relatively liquid. (It's easy to get away if the business is failing). Corporations are easier to raise funds for because stockholders invest small sums of money. However, corporations are under higher scrutiny than other business forms and are subject to state and federal taxes since they are their own legal entity.
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