The corporate form of organization has an advantage over its two rivals in at least three respects: (1) it diffuses financial responsibility, (2) it survives the death of its owners, and (3) it permits of larger accumulations of capital. A single enterpriser, as we have seen, must assume all of the financial risks of his business. Likewise, in a partnership each partner is financially liable for the entire indebtedness of the partnership. For that reason few persons, unless they can assist directly in managing its affairs, care to assume the financial responsibilities which a partnership imposes. In a corporation, however, the situation is different. There each stockholder is ordinarily liable only for the stock he owns; that is, he cannot be held for the debts of the corporation. In other words, his liability to loss is confined to the investment he has already made. Moreover, the death of a stockholder does not, as in the partnership, dissolve the organization of which he is part owner. Consequently, many men who could not or would not become either single enterprisers or partners are easily persuaded to become stockholders in corporations. The result is the much larger accumulation of capital than otherwise would be possible.

Advantages and disadvantages of the corporate form of organization.