Advantages and Disadvantages of Corporations

Questions and Answers

What is an advantage related to corporations?

Stockholders face unlimited liability

Corporations have difficulty transferring ownership

Corporations have a limited lifespan

Corporations can raise more money than a proprietorship or partnership (correct)

Which statement describes an advantage of a corporation?

Stockholders can alter the company structure at will

A corporation has a continuous life (correct)

Corporation ownership is complex to transfer

A corporation can be easily dissolved

Which of the following is an advantage of corporate ownership?

Stockholders have mutual agency

The transfer of corporate ownership is difficult

The transfer of corporate ownership is easy (correct)

Owner's decisions are shared with stockholders

What is an advantage concerning stockholders in a corporation?

Stockholders have limited liability Signup and view all the answers

What is a disadvantage related to ownership in corporations?

Ownership and management are often separated Signup and view all the answers

Which of the following can be considered a disadvantage of corporations?

The earnings of a corporation may be subject to double taxation Signup and view all the answers

What is a disadvantage associated with government regulation of corporations?

Compliance with regulations can be costly Signup and view all the answers

What is a disadvantage regarding the startup costs of a corporation?

Startup costs are higher than other business forms Signup and view all the answers

Study Notes

Advantages of Corporations

Corporations can raise more capital compared to proprietorships or partnerships, enabling large-scale business operations and expansions.
A corporation enjoys a continuous life, meaning it can persist beyond the involvement of individual stockholders or management.
The transfer of ownership in a corporation is streamlined and easy, allowing stockholders to sell or transfer shares without significant complications.
There is no mutual agency among stockholders, meaning individual shareholders do not have authority to obligate the corporation.
Stockholders have limited liability, protecting personal assets from being used to satisfy corporate debts or liabilities.

Disadvantages of Corporations

Ownership and management are often separated, which can lead to conflicts of interest between shareholders and executives.
Earnings generated by a corporation may be subject to double taxation, with profits taxed at both corporate and individual levels when distributed as dividends.
The expensive nature of government regulation can increase operational costs and administrative burdens for corporations.
Startup costs for corporations are higher compared to other business structures, making initial investment more challenging for entrepreneurs.

Description

This quiz explores the key advantages and disadvantages of corporations. Learn about how corporations differ from proprietorships and partnerships in terms of raising capital, continuity, ownership transfer, and agency. Ideal for students studying business law or corporate structures.