Question

One disadvantage of the corporate form of business ownership is the:

1) Limited liability for shareholders
2) Double taxation
3) Ease of transferability of ownership
4) Ability to raise capital through the sale of stock

Answer 1

The disadvantage of the corporate form of business ownership is double taxation, where the corporation's profits are taxed, and dividends to shareholders are taxed again.

Step-by-step explanation:

The subject of this question is one disadvantage of the corporate form of business ownership. Out of the options provided, the correct answer is double taxation, which is a significant drawback of the corporate business structure. This occurs because corporations are taxed on their profits at the corporate level, and then shareholders are also taxed on the dividends they receive, essentially taxing the same money twice.

In comparison, limited liability for shareholders is an advantage, as it protects their personal assets from the company's debts and liabilities. Ease of transferability of ownership and the ability to raise capital through the sale of stock are also advantages, making it easier for the corporation to obtain funds for growth and for ownership to change hands without affecting the company's operations. These advantages contrast with other business forms, like a sole proprietorship, where the owner has unlimited liability and may find it more difficult to raise capital.