Question

what is the principal advantage of corporate form of buiseness organiztion ?Discuss the importance of this advantage to the owner of small family restaurant.Discuss the importance of this advantage to a wealthy enterpreneur who owns several buisenesses.

Answer 1

Corporations are a popular form of business organization for large and small businesses. In this tutorial you will learn about the pros and cons of corporations. You will also learn about S-Corporation and C Corporation.
Meet Tom and Tim. They own a small business that is growing rapidly. However, they need more money to finance their business. They do not want to take a loan from a bank. Instead, they decided to look for investors. They are also less anxious to sue if something happens to the business and they want to protect their personal property.

Because Tom and Tim wanted to expand and embrace investors, their accountants and lawyers recommended setting up a corporation. A corporation is a business entity that is treated as a separate entity from its owner, called a shareholder. Tom and Tim will form a corporation, working with the Secretary of State for the state in which they want to form the corporation.

As the sole shareholder of the corporation, they will elect a board that sets the policies and vision of the corporation. The Board will also appoint company employees who oversee the day-to-day operations of the corporation. Normally, a corporation will have at least one chairman, secretary, and treasurer, even if there are other employees, such as vice presidents.

The Board of Directors will also approve the Articles of Association that govern the activities of the corporation.

Normally, Tom and Tim are elected directors of the corporation and Tom is appointed president of the company and Tim is appointed secretary and fundraiser.

Advantages of the corporation

The corporate form of the enterprise presents a number of advantages for Tom and Tim. The biggest benefit for Tom and Tim is the limited liability that the corporation provides to shareholders. A shareholder of a corporation is not responsible for the obligations, contracts, debts, negligence or illegal activities of the corporation. Most of the money a shareholder can lose is his investment in a corporation - the value of his stock.

Another advantage of a corporation is that it can exist forever, which means it can be better than Tom and Tim because they are separate before the law. This means that investors do not have to worry about the death of the property owner. This also allows the corporation to plan for the long term.

Tom and Tim want investors. One of the great advantages of a corporation is that it is easy to transfer ownership benefits to a corporation. The Board of Directors may grant the right to issue shares in exchange for capital inflows from investors in the company. In fact, Tom and Tim have to be careful and work with their attorneys to comply with state and federal securities laws governing the issuance of shares and other securities to investors.