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) Relaxant's shareholders (the ex-partners)will now be exposed to less liability.
B) The company will probably be subject to fewer regulations and required disclosures.
C) Assuming the firm is profitable,none of its income will be subject to federal income taxes.
D) The firm's investors will be exposed to less liability,but they will find it more difficult to transfer their ownership.
E) The firm will find it more difficult to raise additional capital to support its growth.

Question

Quizplus · Accepted Answer

A) When a partnership is converted into a corporation, the shareholders (formerly partners) are typically exposed to less personal liability. This is because a corporation is a separate legal entity, and shareholders are not personally liable for the corporation's debts beyond their investment in the company.