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Questions and Answers
Which of the following is a characteristic of a corporation?
Which of the following is a characteristic of a corporation?
- Limited liability of shareholders (correct)
- Unlimited liability of shareholders
- Limited liability of owners in a partnership
- Unlimited liability of owners in a sole proprietorship
What is a disadvantage of a corporation compared to other forms of organization?
What is a disadvantage of a corporation compared to other forms of organization?
- Reduced income tax benefits
- Limited access to capital
- Simplified reporting and disclosure requirements
- Increased cost and complexity to follow government regulations (correct)
Why might a large publicly-traded company have different advantages compared to a small private company?
Why might a large publicly-traded company have different advantages compared to a small private company?
- Access to capital through publicly traded shares (correct)
- Simplified ownership structure for public companies
- Lower income tax for public companies
- Reduced government regulations for public companies
What is a major characteristic that distinguishes a public corporation from a private corporation?
What is a major characteristic that distinguishes a public corporation from a private corporation?
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What is the primary advantage of a corporation's separate legal existence?
What is the primary advantage of a corporation's separate legal existence?
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Study Notes
Characteristics of a Corporation
- A characteristic of a corporation is its separate legal existence, which means it is a separate entity from its owners.
Disadvantages of a Corporation
- A disadvantage of a corporation compared to other forms of organization is double taxation, where the corporation's profits are taxed, and then the shareholders' dividends are also taxed.
Advantages of Large Publicly-Traded Companies
- Large publicly-traded companies may have different advantages compared to small private companies, such as access to more capital through the sale of stock, and greater liquidity for investors.
Public vs. Private Corporations
- A major characteristic that distinguishes a public corporation from a private corporation is public ownership, where a public corporation's stock is available for the general public to buy and sell, whereas a private corporation's stock is not publicly traded.
Advantages of Separate Legal Existence
- The primary advantage of a corporation's separate legal existence is limited liability, which means that the owners' (shareholders') personal assets are protected in case the corporation is sued or incurs debt.
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