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Relaxant Inc. operates as a partnership. Now the partners have decided to convert the business into...

Relaxant Inc. operates as a partnership. Now the partners have decided to convert the business into a corporation. Which of the following statements is CORRECT? a. Assuming the firm is profitable, none of its income will be subject to federal income taxes. b. The company will probably be subject to fewer regulations and required disclosures. c. The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. d. The firm will find it more difficult to raise additional capital to support its growth. e. Relaxant's shareholders (the ex-partners) will now be exposed to less liability.

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A corporation is a form of business ownership where the business is a seperate legal entity. Corporation the owner enjoy the limited liability to the debt of the business. A corporation failed to meet its obligation, the shareholders liable to extent of their capital contribution. Convert the business into corporation the shareholders will be exposed to less liability.

Answer = (e) Relaxant's shareholder (the ex-partners) will now be exposed to less liability.

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