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An advantage of corporations over other forms of business organization is: Corporations face fewer regulations Corporations face less tax liability Corporate shareholders face unlimited liability, but get dividends Corporate investors face unlimited liability Corporations face fewer obstacles in raising large amounts of capital
Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership? Answer Corporations generally find it relatively difficult to raise large amounts of capital. Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. Corporate investors are exposed to unlimited liability. Corporations generally face relatively few regulations.
Chapter 1 (page 19) 1. What is the most important difference between a corporation and all other organizational forms? 2. What does the phrase limited liability mean in a corporate context? 3. Which organizational forms give their owners limited liability? 4. What are the main advantages and disadvantages of organizing a firm as a corporation? 5. Explain the difference between an S corporation and a C corporation.