Finance T2 Q6

Tutorial 2 Question 6 Comment on the following statement : “Sooner or later, all successful private companies that are organized as proprietorships or partnership must become corporation. ”

All successful private companies than are organized as proprietorships or partnership must become corporation due to several

• Can get more financial resources to investment: Companies could raise the money by issue the share or bond of company to the public. Companies could more easily get loan from bank. • Operating flexibility Companies could employ the capable employees for the posts of organization, this will more efficient to help the company grow with the help of relevant management experts. Manage by the professional.(Professional managers) Ease of ownership transferability.

Size Companies could expand the size of its operation with full of financial resources • Perpetual life unlimited lifetime • Separate legal existence and limited liabilities of stockholders. • Manage by the BOD BOD could done all the strategic plans, setting all the plans or goals. Management and ownership are separately. ●

When proprietorships and partnerships become corporation, they often incorporate to limit liability and to raise funds through the sale of stock to investors. ●