Question

Nathaniel and Hosea have both invested $25,000 in businesses. Now they both want to sell out and recoup their money. If Nathaniel invested in a corporation and Hosea invested in a partnership, which of them is going to have the MOST difficulty selling their investment?

Answer 1

Answer:

Hosea is going to have the MOST difficulty selling his investment.

Explanation:

A partnership occurs when two or more people establish, manage and operate a company with the aim of making and sharing profits. Therefore, members in a general partnership share both profits and liabilities.

To leave a partnership, the leaving partner has to inform other members and all members have to work together to plan partner's exist effectively. There is usually a “buy-sell” agreement that states the conditions under which a partner can leave, who can buy his share of partnership and at what price. Therefore, it is difficult to leave a partnership.

A corporation is referred to as a legal entity that is separate and different from its owners. The main feature of a corporation is limited liability which implies that shareholders are only liable for the company's debts up to the amount of the shares of the company they hold.

To invest in a corporation, a person just have to buy the share of the corporation either privately or on stock exchanges where shares are bought ans sold. This also implies that a shareholder can easily sell his share either privately or on stock exchange without informing other shareholders. Therefore, it is easy sell out and recoup one's money from corporation.

The explanation above implies that it is going to be more difficulty for Hosea to sell investment than for Nathaniel.