Question

These days, not only single business owner but also partnership business owners are
suffering from massive competition as a result they are compelled to quit their
business because of unlimited liability. Some experts recommend you to convert your
sole proprietorship business into a corporation to avoid the threat of massive
competition and unlimited liability. Now you are thinking of converting your business
into corporation then underline the benefits of corporation as compared to other form
of business with reference to major accounting concepts and principles, keeping an eye
on ethics in accounting.

Answer 1

The first and foremost benefit of converting a sole proprietary business to company is limited liability. In sole proprietorship your personal assets are at risk if the business inures a loss, but no personal liability in in case of company. In company structure business, you can raise more money than in sole proprietary business , so that you can expand the business more. When the business is large you can hire experts and professionals in the business to run it more efficiently and effectively.

Another advantage of company is tax benefits. Company and the individuals are taxed separately so that, if we have any other income it will not be clubbed with the business income and not fell into a higher tax slab also we can get a clear performance indication of the company. Some times relaxations from the government by way of reduced taxes to promote companies in the country also will be a advantage. Sole proprietary concern have barrier to high growth, but for a company there is no barrier it can expand up to any size.