Reduced legal liability for investors
Work Step by Step
Reduced legal liability for investors is an advantage to corporations relative to partnerships. Sole proprietors and partners in a partnership are personally liable for all debts of the business while corporate stockholders are not. On the other hand, corporations have higher taxes than proprietors and partners in partnerships. It is also easier, not harder, for corporations to transfer ownership because they can sell parts of the ownership in form of stock. Corporations are not the most common form of organization in the USA as the number of proprietorships and partnerships is more than five times the number of corporations.