Question

In: Economics

what is the advantage of becoming a company?Why to change type of business from partnership or...

what is the advantage of becoming a company?Why to change type of business from partnership or sole trader to company

Solutions

Expert Solution

In the early stages mall companies may operate as a small proprietorship for several reasons. However, as a business grows, its requires change, and the proprietorship may need enhanced protection for the personal assets from the obligations and liabilities of business as well as a better vehicle to attract the investors. Consequently will need to consider pursuing a more formal business company. The advantages of becoming a company includes:

The main advantage gained by shifting from partnership or sole trader to company is liability protection. A partnership or sole trader is personally accountable for the liabilities and debts that the business generates. Thus indicates that the personal assets are in jeopardy if the business were to ever incur a large debt or liability due to a lawsuit. But a company allow an individual to protect the personal assets from business liability using a liability shield. As a company only the assets owned by the business are at risk and the assets outside of the business generally cannot be claimed while the settlement of business debts. Moreover it attracts a number of investors into the company.


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