Which of the following is the disadvantage of the corporate form of organization?
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5. Which of the following is a disadvantage of the corporate form of business organization? a. limited liability for the owners b. ability to raise money by issuing stock c. ability to raise money by issuing bonds d. extra reporting requirements 6. In the United States, corporations a. are more numerous than sole proprietorships and partnerships. b. produce more business revenue than sole proprietorships and partnerships. c. are more numerous and produce more revenue than sole proprietorships. d. are more numerous and produce more revenue than partnerships.
November 20, 2022/ Steven Bragg
A corporation is a legal entity, organized under state laws, whose
investors purchase shares of stock as evidence of ownership in it. The advantages of the corporation structure are as follows: Limited liability. The shareholders of a corporation are only liable up
to the amount of their investments. The corporate entity shields them from any further liability, so their personal assets are protected. This is a particular advantage when a business routinely takes on large risks for which it could be held liable. Source of capital. A
publicly-held corporation in particular can raise substantial amounts by selling shares or issuing bonds. This is a particular advantage when its shares trade on a stock exchange, where it is easier to buy and sell shares. Ownership
transfers. It is not especially difficult for a shareholder to sell shares in a corporation, though this is more difficult when the entity is privately-held. Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass through many generations of investors. Pass through. If the corporation is structured as an S corporation, profits and losses are passed through to the shareholders, so that the corporation does not pay income taxes. What are the Disadvantages of a Corporation?The disadvantages of a corporation are as follows:
A private company has a small group of investors who are unable to sell their shares to the general public. A public company has registered its shares for sale with the Securities and Exchange Commission (SEC), and may also have listed its shares on a stock exchange, where they can be traded by the general public. The requirements of the SEC and the stock exchanges are rigorous, so comparatively few corporations are publicly-held. When you start a business, one of the first decisions is to decide what form is your business going to take. Will it be a corporation, an LLC, or will you operate as a sole proprietorship? The answer depends on your situation, preferences and expectations about the future growth of the business. Corporations come in two forms, and each has distinct advantages and disadvantages: C corporation and S corporation. What is a C Corporation?The C corporation is the most common form of incorporation. It is a separate legal entity that is owned by shareholders. Most large, publicly traded companies are C corporations. Advantages of C Corporations
Disadvantages of C Corporations
What is an S Corporation?S corporations combine most of the advantages of C corporations with a better tax structure for the owners. Advantages of S Corporations
Disadvantages of S Corporations
Starting a new business as a sole proprietorship is the easiest business form at the beginning. However, as the business grows, converting to a corporation gives the company options to raise capital, attract new shareholders, and provide personal asset protection for the owners. Even though the initial cost to form a corporation is substantial and there is a lot of paperwork, the corporate form is beneficial to the shareholders in the long term. Which of the following is a disadvantage of forming a corporation quizlet?Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation.
Which of the following is a disadvantage of most corporations?The answer is b.
Corporations are taxed on net income at the corporate level. Then, that income is taxed again once it is distributed to owners through dividends. This amounts to double taxation, and it is one of the disadvantages of a corporation.
Which of the following corporate characteristics is a disadvantage of the corporate form of business?The answer is a. Earnings of a corporation may be subject to double taxation. Corporation, just like an individual is subject to income tax, thus, there might be double taxation since the shareholders (in respect to their dividends received) and the corporation file separate income tax returns.
Which of the following is a disadvantage of incorporation?One of the most prominent disadvantages of incorporation is that company profits are often double taxed. Corporations are taxed first on their net taxable income.
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