Question

Which is TRUE about business organizations?

a. Large corporations are taxed more favorably than proprietorships.
b. Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of international businesses (in terms of the number of businesses) are organized as corporations, all governed by the same legal statutes.
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. Corporate stockholders are exposed to unlimited liability.
e. 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.
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.

Which of the following statements accurately describes business organizations?
a. A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company.
b. Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests.
c. In a typical partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
d. A major disadvantage of a partnership relative to a corporation is the fact that federal income taxes must be paid by the partners rather than by the firm itself.
e. In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business, and the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy.

Answer 1

Part I Statement (c)

Part II Statement (b)

Step-by-step explanation:

Part I

There is huge tax on large corporations in comparison to small corporations or sole proprietorship, and still the preference is to large corporations for businesses with huge sales.

As because the source of capital for these is not limited to capital by partners or capital through bank borrowings, it can raise funds through equity, preference, debentures, etc:

Part II

As stated in Part I also that large corporations are preferred because of the capital acquisition feasibility, and in partnerships, there are huge restrictions for the same, and also involves a tedious job to admit or retire a partner, as there is unlimited liability generally.