corporation versus unincorporated assocation

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Business Finance

Description

Please explain briefly why an organization may choose to form a new corporation in which to conduct its operations rather than to be an unincorporated association.

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Explanation & Answer

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To have limited liability

This ensures that the liability of the members of the incorporated organization have limited liability. In case the incorporation is dissolved they are only liable to contribute towards debt payment only up to the amount that they are owed in their shares. no member of the company loses personal property as a result. this is a risk control measure that the members undertake to have control over their own personal assets.

Additionally, by incorporating the organization the management will be forced by the state law to conform to standard accounting practices of data entry and reporting. This will act as a control measure on the management to ensure that they conform to Generally Accepted Accounting Practices (GAAPs) and face regular annual audits.


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Anonymous
Just what I was looking for! Super helpful.

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