Question

Of the following statements, which are true for the corporate form of organization?

A. Directors oversee its business affairs.
B. Stockholders do not have the power to bind the corporation to contracts.
C. It has a continuous life.
D. Transfer of ownership rights among owners generally does not impact equity.
E. Compared to other forms of organization- capital (financing) is more difficult to accumulate.
F. Generally there is no double taxation on corporate income that is distributed to owners.
G. It is not a separate legal entity from its owners.

Answer 1

1. Directors oversee its business affairs

This statement is true. Infact in an organization there are more than 1 director, generally 1 director for each department. So yes they look after business affairs

2. Ownership is usually transferred readily

This statement is true. Even in the case of public company, shares traded will take 2 to 5 business days to settle. However once the trade is done, ownership is considered transferred.

3. This is true. Stockholders have voting rights in rather bigger events such as acquisition, merger etc but not an day to day activities such as contracts.

4. Any corporation is established to continue forever. This is true.

5. This is false. Generally a corporate gets financing easily compared to other form of financing.

6. Income distributed to owners is taxed again as personal income. And income distributed is an after tax income from organization. So double taxation exist. This is false.

7. Assets of the corporation are collatarized for debt and not owner assets. So Owner is not liable. This is false.