2. What are the advantages and disadvantages of changing the company origination from a sole proprietorship to a corporation?
Changing from a sole proprietorship to a corporation has several advantages. Ownership can be readily transferred, and the life of the corporation is unlimited. The corporation borrows money in its own name; therefore the stockholders in a corporation have limited liability for corporate debts. If a company needs new equity it can sell new share of stock and attract new investors, potentially creating unlimited life of the business.
However there is risk with the reward, significant disadvantages of changing from a sole proprietorship to a corporation is double taxation, meaning corporate profits are taxed twice; at the corporate level when they are earned and again at the personal level when the dividends are paid out. Other risks are agency problems, the separation or conflict of interest between stockholders and...