Question
In: Finance
What are two main advantages that the corporate form has over partnerships?
What are two main advantages that the corporate form has over partnerships?
Solutions
Expert Solution
Corporation: A corporation may be viewed as an association of person who contribute money or money’s worth to common stock and used it for common purpose. It is a legal entity distinct from its members (Shareholders).In the corporation capital is contributed by a large number of persons called shareholders. Shareholders are the real owner of the Corporation.
Partnership: Partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.
There are two main benefits that the Corporate form over partnership.
- Corporation is distinct from its members (Shareholders) so members are not liable for debts of the Corporation on the other hand partners are liable for debts of a partnership.
- Taxes saving benefits are also available to shareholders because dividend and profit distribution is not subject to social security and Medicare taxes but salary received by partners are subject to these taxes.
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