Question

One drawback of switching from a partnership to the corporate form of organization is the following:

a. It subjects the firm to additional regulations.
b.It cannot affect the amount of the firm's operating income that goes to taxes.
c. It makes it more difficult for the firm to raise additional capital.
d. It makes the firm's investors subject to greater potential personal liabilities.
e. It makes it more difficult for the firm's investors to transfer their ownership interests.

Answer 1

Answer: Option A

Explanation: A partnership firm does not have much rule and regulation to follow as it is not considered as a separate legal entity and usually these entities do not operate at a very high level.

However, in the case of a corporation the scale of operation is usually very high and the number of stakeholder is also very large. Corporations are separate legal entities therefore, the risk of fraud and negative activities is high.

Hence from the above we can conclude that the correct option is A .