Hello can anyone answer the critical questions for this Some

Hello, can anyone answer the critical questions for this? Someone gave a wrong answer, please help if you can! thanks

https://www.chegg.com/homework-help/questions-and-answers/please-im-looking-questions-critical-thinking-part-please-help-q10120783

Solution

(1)

A new start-up firm starts at a small scale with constraints on financing and time, since typically the owners engage themselves into operations, planning and execution of almost all aspects of the business. In this circumstance, the owners cannot afford the high cost and time associated with complying with regulatory requirements which become mandatory if they start as a public corporation. Secondly, a publicly held corporation needs to float an IPO (Initial public offering) to sell shares to the public. The public investors will not purchase an unknown new-born firm\'s shares because they have no historical performance data on the firm, and so don\'t want to take the risk associated with investing.

(2)

Proprietorships and partnerships, by nature, attract minimum regulatory requirements and lower tax rates. In initial years, until the firm is on a well-settled footing, compliance with such regulations or paying a higher tax rate may cause loss or lower profits in the gestatiion years. So, to avoid such complexities, many start-ups opt to register as proprietorship or partnerships.