Final answer:
The principal advantage of the corporate form of business organization is limited liability. This is important for the owner of a small family restaurant because it protects their personal assets from being seized to cover business debts. For a wealthy entrepreneur who owns several businesses, limited liability allows them to take risks without risking their personal wealth.
Step-by-step explanation:
The principal advantage of the corporate form of business organization is limited liability. This means that the owners of a corporation are not personally responsible for the debts and liabilities of the business. This is important for the owner of a small family restaurant because it protects their personal assets, such as their home, from being seized to cover business debts. For a wealthy entrepreneur who owns several businesses, limited liability allows them to take risks without risking their personal wealth.
In addition to limited liability, other advantages of the corporate form of business organization include:
- Ease of raising capital: Corporations can easily raise capital by selling shares of stock or issuing corporate bonds. This is beneficial for both the small family restaurant owner, who may need funds to expand or renovate, and the wealthy entrepreneur, who may need capital to start new businesses.
- Perpetual existence: A corporation has an unlimited life and can continue to operate even if the original owners sell their shares or pass away. This provides stability and longevity for the small family restaurant owner and the wealthy entrepreneur.
- Separation of ownership and management: In a corporation, ownership is separate from management. This allows the small family restaurant owner and the wealthy entrepreneur to hire professional managers to run the day-to-day operations of their businesses, freeing them up to focus on strategic decision-making and growth.