Question

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

A.Corporations generally find it relatively difficult to raise large amounts of capital.
B.Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership.
C.Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization.
D.Corporate investors are exposed to unlimited liability.
E.Corporations generally face relatively few regulations.

Answer 1

A business might choose to operate as a corporation rather than as a sole proprietorship or a partnership because corporate shareholders escape liability for the firm's debts, they generally find it easier to raise large amounts of capital, and they can protect their personal assets.

Step-by-step explanation:

A business might choose to operate as a corporation rather than as a sole proprietorship or a partnership for several reasons. One reason is that corporate shareholders escape liability for the firm's debts, which can help protect their personal assets.

However, this advantage may be offset by the tax disadvantages of the corporate form of organization. Additionally, corporations generally find it relatively easier to raise large amounts of capital compared to sole proprietorships or partnerships.