Enterprise is dictated primarily by financial requirements

Question

“The legal form an enterprise assumes is dictated primarily by the financial requirements of its particular line of production.”  Do you agree?

Answer 1

It is possible to agree with this statement in part.  Where financial requirements are large, the corporate form is advantageous because financial capital can be raised by issuing stocks and bonds. The new bondholder or stockholders know that the corporation has an unlimited life and that their shares or bonds are transferable.  It is difficult to raise large amounts of financial capital for sole proprietorships because financial institutions usually have a limited amount of funds available to loan to any single borrower; it is not possible to sell shares or issue bonds; individuals fear loaning large amounts of money to any single owner.