Which of the following statements is CORRECT? (Points : 5)
One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
It is generally easier to transfer one's ownership interest in a partnership than in a corporation.
One of the advantages of the corporate form of organization is that it avoids double taxation.
One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., "one person, one vote."
Corporations of all types are subject to the corporate income tax.
Question 3. 3. Which of the following statements is CORRECT? (Points : 5)
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It makes the firm's investors subject to greater potential personal liabilities.
It makes it more difficult for the firm's investors to transfer their ownership interests.
Question 6. 6. Which of the following statements is CORRECT? (Points : 5)
A hostile takeover is the main method of transferring ownership interest in a corporation.
Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.
A corporation is a legal entity that is generally created by a state, and it has a life and existence that is separate from the lives of its individual owners and managers.
Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization.
Although its stockholders are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way, i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions.
Question 7. 7. Which of the following statements is CORRECT? (Points : 5)
Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate in one of these forms rather than as a corporation. However, if the business gets very large, it becomes advantageous to convert to a corporation, primarily because corporations have important tax advantages over proprietorships and partnerships.
Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U.S. businesses (in terms of number of businesses) are organized as corporations.
Due to legal considerations related to ownership transfers and limited liability, most business (measured by dollar sales) is conducted by corporations in spite of large corporations' often less favorable tax treatment..
Large corporations are taxed more favorably than sole proprietorships.
Corporate stockholders are exposed to unlimited liability.
Question 8. 8. Which of the following statements is CORRECT? (Points : 5)
The corporate bylaws are a standard set of rules established by the state of incorporation. These rules are identical for all corporations in the state, and their purpose is to ensure that the firm's managers run the firm in accordance with state laws.
The corporate charter is a standard document prescribed by the state of incorporation, and its purpose is to ensure that the...