Which of the following statements is CORRECT?
A) It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required.
B) Corporations face fewer regulations than sole proprietorships.
C) One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level.
D) One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership.
E) If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

Question

Quizplus · Accepted Answer

In a regular partnership, each partner is personally liable for the debts and obligations of the business. However, in a corporation, equity investors are only exposed to the amount of their investment and do not have personal liability for the corporation's debts. This is known as limited liability, which is a key advantage of forming a corporation. The other options are incorrect.

Which of the Following Statements Is CORRECT