Brad started a pest control business.To protect his personal assets against liability arising out of the business,Brad incorporated the business.Brad's use of the corporate form of organization to shield against personal liability claims illustrates
A)fundamental risk.
B)noninsurance transfer.
C)risk retention.
D)objective risk.

Question

Quizplus · Accepted Answer

Brad's incorporation of his pest control business is an example of a noninsurance transfer because he is transferring the risk of personal liability to the corporate entity. By incorporating, Brad is creating a separate legal entity which can be held liable for any damages or claims arising from the business, rather than exposing his personal assets to such claims. This is a common risk management strategy for small business owners. The other choices do not accurately describe Brad's situation. Fundamental risk refers to the inherent risk associated with a particular activity, while objective risk is the degree of uncertainty associated with a particular loss event. Risk retention involves accepting the potential cost of a loss without transferring it to a third party.

Brad Started a Pest Control Business