Relaxant Inc. operates as a partnership. Now the partners have decided to convert the business into a corporation. Which of the following statements is CORRECT? a. Relaxant's shareholders (the ex-partners) will now be exposed to less liability. b. The firm will find it more difficult to raise additional capital to support its growth. c. Assuming the firm is profitable, none of its income will be subject to federal income taxes. d. The company will probably be subject to fewer regulations and required disclosures. e. The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership.

A corporation is a form of business ownership where the business is a separate legal entity from its owners. A corporation enjoys similar rights to business transactions as human beings. It can own properties, enter into contracts, makes purchases and sales, pay taxes, sue or be sued. A corporation has unlimited life; it continues to exist until its owner decides to liquidate or wind it up.

A distinctive feature of a corporation is that the owner enjoys limited liabilities to the debts of the business. Should a corporation fail to meet its obligation, the shareholders are liable to the extent of their capital contribution. Their personal properties cannot be attached to the debts of the business.