Commerce Essay Example | Topics and Well Written Essays - 500 words

Commerce - Essay Example In contrast, sole proprietorships and general partnerships offer no shield or protection against personal liability and creditors can satisfy liabilities from personal assets of the owner(s). For instance, in the case of Walmart, they offer shares to be purchased as a benefit to their associates. If an associate chooses to invest their money in stock purchases and Walmart becomes severely devalued or goes out of business all together, the associates that invested to purchase stocks will not be held responsible for any outstanding debts of the company. However, in order to avoid risks due to small invested capital, creditors may require personal guarantees from owners of the incorporations. As shareholder entities have separate legal existence, personal liability protection is a major benefit for owners of small and medium incorporated businesses. New shareholders and investors can be easily attracted if their personal assets are protection is guaranteed, increasing the investment pool. The investors willing to remain passive are not responsible for managerial activities of the active shareholders. The corporate legal person has infinite life span, and management changes such as resignation, retirement or death of corporate personnel has no affect over the entire existence or continuity of incorporations. Separate legal personality of firms provides shareholders with liberty to choose the tax treatment according to their investment projects. Transaction costs and operational risks to owners are reduced through existence of a legal framework. The investor does not have to pay taxes on the profits of the company; only on the share that they receive in dividends which are taxed at a lower rate. The taxes that are paid on profits are the responsibility of the company. Other taxation benefits of incorporation are that once incorporated, many additional items of expenditure become tax deductible. For example medical expenses,