Which of the following statements is CORRECT?
A) 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.
B) Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate 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.
C) Due to legal considerations related to ownership transfers and limited liability, which affect the ability to attract capital, most business (measured by dollar sales) is conducted by corporations in spite of large corporations' less favorable tax treatment.
D) Large corporations are taxed more favorably than sole proprietorships.
E) Corporate stockholders are exposed to unlimited liability.

Question

Quizplus · Accepted Answer

The statement correctly identifies that legal considerations related to ownership transfers and limited liability affect the ability to attract capital, leading to most business being conducted by corporations despite their less favorable tax treatment. Option A is incorrect because while corporations may have ease of ownership transfer and limited liability, other factors such as higher costs and regulations may deter some businesses from incorporating. Option B is also incorrect because tax advantages are not the primary reason for converting to a corporation. Option D is incorrect because large corporations are not taxed more favorably than sole proprietorships. Option E is incorrect because corporate stockholders are not exposed to unlimited liability due to the limited liability protection offered by incorporation.

Which of the Following Statements Is CORRECT