Which of the following statements is CORRECT?
A) It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship.
B) Corporate shareholders are exposed to unlimited liability.
C) Corporations generally face fewer regulations than sole proprietorships.
D) Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation.
E) Shareholders in a regular corporation (not an S corporation) pay higher taxes than owners of an otherwise identical proprietorship.

Question

Quizplus · Accepted Answer

It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. In a corporation, ownership can be transferred by selling or buying shares, while in a sole proprietorship, the entire business must be sold or transferred.

Option B is incorrect because corporate shareholders have limited liability, meaning their personal assets are not at risk for the corporation's debts or liabilities.

Option C is incorrect because corporations generally face more regulations than sole proprietorships due to their larger size and legal structure.

Option D is partially true about corporate shareholders being exposed to unlimited liability, but the tax advantages of incorporation often outweigh this risk.

Option E is incorrect because shareholders in a regular corporation generally pay lower taxes than owners of a sole proprietorship due to the ability to deduct business expenses and the potential for tax deferral.

Which of the Following Statements Is CORRECT