why do you think sole proprietorship and partnership typically incorporate (become corporations) when they experience rapid...

why do you think sole proprietorship and partnership typically incorporate (become corporations) when they experience rapid and sizable increases in their production, sales and profits?

Expert Solution

Answer:-

A sole proprietorship is a business claimed and worked by one individual (proprietor). Partnership is claimed and worked by at least two proprietors or accomplices. A partnership is a legitimate element, properly incorporated with Articles of Association, with restricted risk, can deliver and sell products, can incur debts, can sue or be sued. The obligation of the investors is restricted to the estimation of the offers they hold. The financial risk of the company is restricted to the estimation of the benefits they hold.

- The reasons sole owners and partnership firms decide to incorporate is a result of :-

• Restricted risk of the corporations: The obligation of the investors is constrained to the estimation of the offers they hold. The financial risk of the enterprise is restricted to the estimation of the benefits they hold.

• Life of the element: Sole proprietorship and partnerships are subject to their proprietors – while the life of the corporations which can go on indefinitely.

• Transferability of offers: Shares can be handily moved by investors.

• Credit: Corporations can without much of a stretch raise capital in the financial exchange

• Income of the element: Income for the situation of sole proprietorship and partnership is isolated among the proprietor or proprietors, while, for the situation of incorporated corporations, the income streams into the business

Rahul Sunny answered 8 months ago

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