Question

The major disadvantage of the corporate form of business organization is: ?

1) difficulty in raising capital
2) double taxation
3) limited liability
4) all of the above

Answer 1

The major disadvantage of the corporate form of business is double taxation, where earnings are taxed at both the corporate and dividend levels.

Step-by-step explanation:

The major disadvantage of the corporate form of business organization is double taxation. This issue occurs because the business entity is taxed on its earnings at the corporate level and then shareholders are taxed again on the dividends they receive. This is unlike sole proprietorships and partnerships, where earnings are only taxed at the individual owner or partner level. While corporations have advantages like limited liability, which protects personal assets from business debts and legal actions, and the ability to raise substantial capital, the impact of double taxation on a corporation's net income can be significant. Additionally, corporations encounter challenges such as strict government regulation, the need for more complex administration, and the initial costs and efforts to establish the corporate entity.

The major disadvantage of the corporate form of business organization is double taxation. Corporations are subject to taxation at the corporate level, and the dividends paid to shareholders are also taxed. This means that the same income is taxed twice, which can signif