Which of the following statements is CORRECT?
A) Corporations generally face fewer regulations than sole proprietorships.
B) Corporate shareholders are exposed to unlimited liability.
C) It is usually easier to transfer ownership in a corporation than in a partnership.
D) Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantages of incorporation.
E) There is a tax disadvantage to incorporation, and there is no way any corporation can escape this disadvantage, even if it is small.

Question

Quizplus · Accepted Answer

Transferring ownership in a corporation is usually easier than in a partnership because ownership in a corporation is represented by shares of stock that can be easily bought and sold, whereas in a partnership, ownership is tied to specific individuals who must approve any transfer of ownership.

A is incorrect because generally, corporations face more regulations than sole proprietorships.
 
B and D are incorrect because corporate shareholders have limited liability, meaning they are only responsible for the amount of money they have invested in the corporation.

E is incorrect because there are tax advantages to incorporation, such as the ability to deduct certain expenses and a lower tax rate on retained earnings. However, there can be some disadvantages, such as the double taxation of profits if the corporation is a C corporation.

Which of the Following Statements Is CORRECT