Which of the following statements is CORRECT?
A) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
B) It is generally easier to transfer one's ownership interest in a partnership than in a corporation.
C) One of the advantages of the corporate form of organization is that it avoids double taxation.
D) 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."
E) Corporations of all types are subject to the corporate income tax.

Question

Quizplus · Accepted Answer

The statement that is correct is that one of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. This means that the owner is personally responsible for all debts and obligations of the business, and if the business cannot pay its debts, the owner's personal assets may be seized to satisfy those debts. The other statements are incorrect. B is false because it is generally easier to transfer ownership interest in a corporation than in a partnership. C is false because the corporate form of organization is subject to double taxation, meaning that both the corporation and its shareholders must pay taxes on corporate profits. D is false because not all corporations have equal voting rights. Some corporations have different classes of stock with different voting rights attached to each class. E is false because some corporations, such as S corporations, are not subject to the corporate income tax.

Which of the Following Statements Is CORRECT