Question

Which of the following statements is CORRECT?

*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.

*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.

*Large corporations are taxed more favorably than proprietorships.

*Corporate stockholders are exposed to unlimited liability

Answer 1

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.

Step-by-step explanation:

As in large corporations there is a limited liability up to the amount of shares held by any person. The liabilities are limited and not unlimited.

Also, there is an ease in transfer of ownership as through sale in open market which generally is easily feasible and there are no such difficult processes of following these regulations of transferring ownership.

Also in corporations huge number of people can be involved, as there is no maximum limit of number of owners in corporations.

Even though the tax rates are high for corporations, but since all of the above points are favorable large businesses prefer corporations.