Which form of business structure typically has the greatest potential for agency problems?
A)Sole proprietorship
B)General partnership
C)Limited partnership
D)Corporation
E)Limited liability company

Question

Quizplus · Accepted Answer

Corporations have the greatest potential for agency problems because of separation between ownership and management. Shareholders are the owners but do not manage the company. Agency problems can arise when managers prioritize their own interests over those of shareholders. This is known as the principal-agent problem. Additionally, the separation of ownership and control can lead to conflicts of interest between shareholders and managers.

Which Form of Business Structure Typically Has the Greatest Potential