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?
A) Corporations generally find it relatively difficult to raise large amounts of capital.
B) Less of a corporation's income is generally subjected to taxes than
Would be true if the firm were a partnership.
C) 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.
D) Corporate investors are exposed to unlimited liability.
E) Corporations generally face relatively few regulations.

Question

Quizplus · Accepted Answer

By choosing to operate as a corporation, the shareholders can limit their personal liability for the firm's debts; however, there are tax disadvantages associated with this form of organization. Additionally, corporations generally have an easier time raising large amounts of capital than sole proprietorships or partnerships. The statement in option B is incorrect, as corporations typically face higher taxes than partnerships. Option D is also incorrect, as corporate investors are not exposed to unlimited liability like they would be in a sole proprietorship or partnership. Option E is also incorrect, as corporations generally face more regulations than sole proprietorships or partnerships.

Which of the Following Could Explain Why a Business Might