Vanderbilt Law Review


Bruce McClain

First Page



At the outset, it must be emphasized that a decision as to the more desirable mode of doing business should never be based solely upon tax considerations. In every instance, the following legal and practical advantages of transacting business as a corporation must always be borne in mind: (1) Limited Liability. The liability of a stockholder for the debts of the corporation is limited to his investment in its stock, while all of the property bf a general partner is subject to the claims of the firm's creditors, if its assets are insufficient to satisfy such claims in full. (2) Continuity of Existence. A corporation may have perpetual existence, since changes in the ownership in its shares, whether resulting from the death of a stockholder or otherwise, have no effect upon the continuance of the corporation. Ordinarily the death or withdrawal of a partner dissolves the partnership but a partnership agreement may provide that the firm shall be continued by the surviving partners.(3) Ready Transferability of Shares. The disposal of the interest of a stockholder in a corporation is a very simple matter, since it merely requires the transfer of his stock to another person, but the sale of a partnership interest usually involves an accounting to determine the value of the retiring partner's share. These points are, of course,'elementary, but perhaps it may be for that very reason that there is a recent tendency in some quarters to minimize them.