Which form of business would be the best choice if it were necessary to raise large amounts of capital?

Question

BlackTom AI · Accepted Answer

To determine the best form of business for raising large amounts of capital, we must consider how each structure facilitates raising funds.
Option 1: Limited partnership. This structure allows limited partners to contribute capital, but it typically requires at least one general partner who has unlimited liability and management control. It is not the primary vehicle for large-scale equity financing.
Option 2: Corporation. This is the standard vehicle for raising substantial capital because it can issue stock to a large number of investors, access public markets, and attract diverse funding sources. It also provides limited liability to shareholders, which makes investment more attractive. These features collectively make it the most suitable for large-scale fundraising.
Option 3: Limited liability company (LLC). An LLC offers limited liability and flexible management, but it generally does not match a corporation for large equity financing, especially on public markets, and it is less conventional for widespread investor access.
Option 4: General partnership. In a general partnership, all partners have joint and several liability, and there is limited ability to raise large sums of capital from passive investors. This makes it unattractive for substantial fundraising.
Option 5: Sole proprietorship. This structure places all liability on the individual owner and has very limited capacity to raise capital, since funds must come from the owner or personal loans, making it unsuitable for large-scale financing.
In summary, among the listed options, a corporation uniquely aligns with the need to raise large amounts of capital due to its ability to issue stock and attract many investors, while offering limited liability to shareholders.

33:390:300:13 FINANCIAL MANAGEMENT Exam 1- Requires Respondus LockDown Browser

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

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